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United States Inflation February 2024

United States: Inflation exceeds market expectations in February

Inflation inched up to 3.2% in February from January’s 3.1%. February’s reading marked the highest inflation rate since December 2023, and was above market expectations of 3.1%. Looking at the details of the release, prices for transportation increased at a notably faster rate, driving the uptick in headline inflation.

Annual average inflation ticked down to 3.6% in February (January: 3.8%). Meanwhile, core inflation edged down to 3.8% in February, from January’s 3.9%.

Lastly, consumer prices rose 0.44% from the previous month in February, accelerating from the 0.31% increase seen in January. February’s figure was the highest reading since August 2023.

Our Consensus is for inflation to trend down from current levels later this year but to remain above the Fed’s 2.0% target on solid domestic demand.

On the monetary policy implications, TD Economics’ Thomas Feltmate said:

“For a Fed that has become increasingly data dependent, this morning’s numbers are unlikely to give policymakers much further conviction that inflation remains on a sustained downward path to 2%. With the economy still strong, Fed officials can afford to keep rates elevated into the summer and continue to wait for further signs of cooling on the inflation front before dialing back the policy rate.”

Similarly, UniCredit’s Edoardo Campanella said:

“The last mile in the disinflationary process is perhaps proving to be more challenging than previously envisaged. […] We reiterate our view that the first rate cut will probably come in June for a total of 125bp of cuts this year, as the economy and inflation slows. But the risks are skewed towards a later start and fewer cuts in total in 2024.”

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