February inflation data is expected to show a continued modest slowdown in consumer prices as investors weigh the latest report against the backdrop of the stunning collapse of Silicon Valley Bank last week.
The closely-watched Consumer Price Index (CPI), set for release at 8:30 a.m. ET Tuesday morning, is expected to show consumer prices cooled slightly last month, with headline inflation forecast to rise 6% over the prior year, a slowdown from January’s 6.4% annual gain, according to estimates from Bloomberg.
A 6% increase would mark the slowest annual increase in consumer prices since September 2021.
“Core” inflation, which strips out the more volatile costs of food and energy, is forecast to rise 5.5% over last year and 0.4% over the prior month in February, marking a more modest slowdown than the headline figures are expected to show.
Here are expectations for the key figures from the report, per consensus estimates from Bloomberg:
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CPI YoY change: +6% vs. +6.4% in January
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CPI MoM change: +0.4% vs. +0.5% in January
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“Core” CPI YoY change (ex. food and gas): +5.5% vs. +5.6% in January
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“Core” CPI MoM change (ex. food and gas): +0.4% vs. +0.4% in January
Tuesday’s inflation data comes just over a week before the Fed’s next policy announcement, set for March 22, at which investors now expect the central bank to raise interest rates by 25 basis points, or 0.25%.
Last week, investors placed a better-than-50% chance on the Fed raising rates by 50 basis points this month following two days of testimony from Fed Chair Jerome Powell that emphasized interest rates were likely to go higher than previously forecast.
Developments from the banking sector over the last week have changed this outlook with some Wall Street analysts surmising the recent failure of Silicon Valley Bank (SIVB), and the risk of stoking financial instability, will alter the Federal Reserve’s plans.
The Fed, which has a current benchmark interest rate target of 4.5%-4.75%, has hiked rates by a cumulative 4.5% over the past year in an effort to quell inflation. Consumer prices peaked last summer, hitting a roughly 40-year high of 9.1%.
Alexandra Canal is a Senior Entertainment and Media Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com
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