The US Department of Labor released the Consumer Price Index (CPI) report on Tuesday. Although inflation rose in February year-over-year, the rise was expected and the annual inflation rate for all items was 6%. Slowing inflation eased some concerns, but fears of financial contagion spread. Market strategists are further anticipating the US central bank’s decision on the federal funds rate.
Market awaits Fed interest rate decision after CPI report
Inflation in February was in line with expectations, with the consumer price index (CPI) rising 0.4% last month, an annual pace of 6%, according to the latest report from the US Bureau of Labor Statistics. “Over the past 12 months, the all-items index rose 6% before seasonal adjustment,” the CPI report said. “The housing index was the main contributor to the monthly increase for all items, accounting for more than 70% of the rise, while the indices for food, leisure and furniture and household operations also contributed.”
Overall stock market sentiment improved as three of the four benchmark US equity indices, excluding the Russell 2000, posted gains. However, on Monday, three of the four benchmarks were down, except for the Nasdaq Composite. In addition, Monday marked the biggest three-day drop of the two-year Treasury yield since “Black Monday” in 1987. However, on Tuesday, following the CPI report, the two-year Treasury yield bounced back.
According to Kevin Cummins, chief US economist at Natwest Markets, although consumer inflation has eased, it has not had a significant impact on the market. “As far as how important we thought this (CPI) was going to be, it’s certainly not as much of a market driver anymore, given the backdrop,” Cummins said in a statement. interview with CNBC. The Natwest Markets analyst also predicts that the Fed will not raise the federal funds rate in March. While stock markets showed some improvement following the release of the Labor Department’s CPI report, precious metals like gold and silver saw an uptick. little dip at 9 a.m. (ET) on Tuesday.
The day before, Monday, the price of gold had risen by 2% and the cost of an ounce of silver had risen by 6% against the US dollar. However, according to the New York spot price, both precious metals saw declines at 9:00 a.m. Tuesday, with gold falling 0.80% and silver 0.71%. Conversely, cryptocurrencies saw a significant rebound, with the global crypto market capitalization increasing by 11.17% to $1.13 trillion. bitcoin (BTC) rose 14.72% above the $26,000 per unit zone, and the second crypto asset, ethereum (ETH), rose 8.43% to $1,744 per ether.
What do you think the US central bank’s decision on the federal funds rate will be, and how do you think it will affect the overall economy and financial markets? Share your opinion in the comments below.
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