Shoppers appear at a Kroger supermarket on October 14, 2022 in Atlanta, Georgia.
Elijah Novelage | Elijah Novelage AFP | Getty Images
Rising gasoline prices could set the stage for inflation in February, potentially reinforcing the Federal Reserve’s decision to cut interest rates slowly.
Economists expect prices for a variety of goods and services to rise 0.4% this month, slightly higher than January’s 0.3% gain, according to the Dow Jones consensus. Excluding food and energy, core inflation is expected to rise 0.3%, also a tenth of a percentage point higher than last month.
When the U.S. Department of Labor’s Bureau of Labor Statistics releases the latest consumer price index data at 8:30 a.m. ET on Tuesday, headline inflation is expected to increase by 3.1% annually and core inflation will increase by 3.7%. The January 12-month readings were 3.1% and 3.9% respectively.
Although it has fallen sharply since its peak in mid-2022, inflation’s resilience will almost certainly ensure that the Fed will cut interest rates. Meeting from April 30th to May 1stBased on current market pricing, that could last until summer. January consumer price index (CPI) data came in higher than expected, sparking market turmoil, and then Fed officials turned to more cautious rhetoric on easing policy.
“While we don’t expect inflation trends to accelerate again this year, less obvious developments in the coming months may give the Fed more confidence that inflation will continue to return to its target.” Wells Fargo senior economist Sha Sha La Haus said in a recent client note.
Energy prices eased earlier in the winter, putting some downward pressure on the overall numbers.
But Wells Fargo estimates that energy services rebounded 4% in February, leading to higher prices at the pump, with a gallon of regular gasoline rising about 20 cents, or more than 6%, from a month ago. According to AAA.
The bank also estimates that commodity prices remain firm despite some easing of supply chain pressures and rising interest rates. On the bright side, lower prices for travel, medical care and other services are helping to curb inflation, House said.
Still, Wells Fargo raised its full-year inflation forecast.
Economists at the bank now expect core consumer prices to rise 3.3% this year, up from a previous forecast of 2.8%. Wells Fargo will focus on the core personal consumption expenditures price index, the Fed’s preferred indicator, and expects inflation to be 2.5% this year, compared with the previous forecast of 2.2%.
Wells Fargo isn’t the only bank expecting inflation to rise.
The New York Fed found in a February survey of consumers that while respondents held their one-year inflation expectations at 3%, their expectations for three-year and five-year inflation accelerated to 2.7% and 2.9%, respectively. , both performed well. ahead of the central bank’s 2% target.
While rising natural gas prices could have a huge impact on the survey’s monthly swings, the outlook for higher natural gas prices is actually relatively positive.
A measure from the Federal Reserve Bank of Atlanta “Sticky Price” Inflation The 12-month growth rate in January was 4.6%. The indicator focuses on items such as housing and insurance, and Fed officials hope housing costs will fall throughout the year, taking pressure off the cost-of-living indicator.
On Thursday, the U.S. Bureau of Labor Statistics will release the February Producer Price Index, which measures the goods and services producers receive at the wholesale level. The two indexes will be the last inflation data the Federal Open Market Rate-setting Committee sees before its next meeting on March 19-20.
