Tuesday, April 16, 2024
Year : 2, Issue : 16
The US Federal Reserve held its benchmark overnight interest rate steady in the 5.25 per cent-5.50 per cent range at its March 19-20 policy meeting, and officials continued to anticipate approving three quarter-percentage-point rate cuts by the end of 2024.
Before policymakers begin to ease borrowing costs, they say they want to see more data confirming that inflation is returning to the US central bank’s 2 per cent target.
Data for March showed retail sales rose 0.7 per cent, more than twice the figure projected by economists in a recent Reuters poll.
The unexpected jump is likely to add to already growing sentiment among Fed officials that there is no urgent need to cut interest rates in an economy that is showing little sign of buckling under the pressure of current credit conditions.
INFLATION (CPI released April 10; next release PCE April 26):
The Consumer Price Index accelerated in March to a 3.5 per cent annual rate versus 3.2 per cent in February, a blow to Fed officials hoping for signs inflation would resume its decline after progress stalled at the start of the year. Core prices, excluding food and energy costs, rose at a 3.8 per cent annual rate, the same as the month before.
Wall Street’s main indexes plummeted on Friday, capping a week marked by hotter-than-expected inflation and jobs data that forced investors to reset expectations for the timing of interest rate cuts.
The personal consumption expenditures (PCE) price index, which the Fed uses to set its 2 per cent inflation target, increased at a 2.5 per cent annual rate in February, up from the 2.4 per cent seen in January. Core inflation stripped of volatile food and energy prices rose 2.8 per cent, a slight decline from the upwardly revised 2.9 per cent in January.
EMPLOYMENT (Released April 5; next release May 3):
US firms added a larger-than-expected 303,000 jobs in February, and employment gains in the previous two months were revised up by 22,000. The unemployment rate fell unexpectedly to 3.8 per cent, marking the 26th straight month below 4 per cent – the longest such run since the 1960s – and prompting Richmond Fed President Thomas Barkin to remark: “That’s a quite-strong jobs report.”
Fed officials have become more comfortable with the idea that continued strong job growth could still allow inflation to fall, especially if the supply of labor keeps growing and wage growth eases. Both did in March: The workforce grew by 469,000, the most since last August, and annual wage growth eased to 4.1 per cent, the lowest rate of increase since June 2021. Still, that rate is above the 3.0 per cent-3.5 per cent range that most policymakers view as consistent with the Fed’s inflation target.
Source: Reuters
