The February consumer price report for February was not good enough to stop the Federal Reserve from hiking next week, many analysts believe.
The U.S. consumer price inflation data for February released Tuesday hardens expectations for the Federal Reserve to raise its benchmark interest rate by a quarter percentage point next week, even in light of the collapse of California’s Silicon Valley Bank, economists said Tuesday.
“The data was not good enough to stop the Fed hiking next week,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.Expectations of a rate hike come with an important caveat — it assumes markets stay calm and no more banks fail.Krishna Guha, vice chairman of Evercore ISI, said that the hot data will force markets “to reconsider what we see as an ill-founded view that the Silicon Valley Bank crisis means that the Fed is likely done raising interest rates.
“The latest bout of financial market jitters has introduced significant uncertainty that we now believe officials will pause at next week’s FOMC meeting,” said Kevin Cummins, chief U.S. economist at Natwest. Traders in the fed funds futures market now see a 90% chance of a quarter point hike next week, which would bring the Fed’s target range up to 4.75%-5%. They see another quarter–point move in May but then believe the Fed will stop.
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