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In a surprising turn of events, the U.S. Consumer Price Index (CPI) surged to a 3.2% annual pace in February, posing a challenge to the Federal Reserve’s inclination to initiate rate cuts amidst persistent inflation in 2024.
According to Tuesday morning’s government report, the Consumer Price Index outpaced expectations, rising to 3.2% on a year-over-year basis, exceeding both forecasts for 3.1% and January’s 3.1%. Meanwhile, the core rate, which excludes food and energy costs, saw a slight decrease but still surpassed estimates, registering at 3.8% compared to expectations of 3.7% and January’s 3.9%.
On a monthly basis, the CPI climbed 0.4% in February, aligning with projections and showing an uptick from January’s 0.3%. Similarly, the core CPI increased by 0.4%, surpassing expectations of 0.3% and remaining steady compared to January’s 0.4%.
In the immediate aftermath of the data release, the price of bitcoin (BTC) experienced a marginal increase to $72,000.
At the onset of the year, market expectations implied approximately five or six rate cuts in 2024, with the anticipation of commencement as early as the Federal Reserve’s March meeting, scheduled for next week. However, robust economic growth coupled with persistently elevated inflation figures exceeding the Fed’s 2% target have dampened these rate cut prospects. Consequently, the expected timing for the inaugural rate cut has been postponed to the summer, as indicated by the CME FedWatch Tool.
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