US consumer prices rose by 6.0% in the 12 months to February, according to Labor Department data on Tuesday that marked the slowest inflationary growth since September 2021 and signaled progress in the Federal Reserve's battle against price growth
WASHINGTON (Pakistan Point News / Sputnik - 14th March, 2023) US consumer prices rose by 6.0% in the 12 months to February, according to Labor Department data on Tuesday that marked the slowest inflationary growth since September 2021 and signaled progress in the Federal Reserve's battle against price growth.
The Consumer Price Index for All Urban Consumers, known in short as the CPI, also grew by a smaller 0.4% last month after a 0.5% expansion in January.
Core annual CPI, which strips out volatile food and energy prices, was up 5.5% in the year to February, compared to a 5.6% growth in January. The only negative number, if any, was that of core CPI, which rose 0.5% last month versus a previous 0.4%.
Economists said the data suggested the Fed was making slow and steady progress in its long and hard fight against inflation. The central bank will decide on its next rate hike on March 22, and the CPI data indicates that it will go with a 25-basis point hike, rather than a 50-basis point increase.
"Overall, the data is close to expectations," economist Adam Button said in a post on the ForexLive forum. "The month/month core (inflation) is a touch hot but the year/year number was in line, so I think it will be forgiven, especially with the weekly earnings number (being) surprising(ly) lower."
Real weekly earnings showed a negative 0.4% growth in February, from an original 0.7% expansion in January that was revised down to 0.3%.
The Fed has identified jobs and wage growth as among the principal drivers of inflation. The labor market has been the juggernaut of US economic recovery from the pandemic, with hundreds of thousands of jobs being added without fail since June 2020 to make up for the initial loss of 20 million jobs to the COVID-19 crisis. Average monthly wages have also grown without stop since May 2021.
Fighting inflation isn't the Fed's only agenda. It is also mandated to ensure "maximum employment" for Americans, adding to the central bank's headache in ensuring a balance between the two priorities even as it tries to cool employment in order to get price pressures down.
Under the Fed's definition, maximum employment is achieved when the monthly jobless rate is at 4% or below. The central bank has scored full points on this task for a year now, with unemployment falling beneath 4% since February 2022.
The CPI itself hit a 40-year high in June last year when it grew at an annual rate of 9.1%, versus the Fed's inflation target of just 2% per annum.
In a bid to control surging prices, the central bank has since added 475 basis points to interest rates since March via eight rate hikes.
Prior to the Fed's rate hikes, interest rates peaked at just 25 basis points, as the central bank slashed them to nearly zero after the global COVID-19 outbreak in 2020.
The Fed, which executed four back-to-back jumbo rate hikes of 75 basis points from June through November, imposed a more modest 50-basis point increase in December and a 25-basis point hike in January.
