U.S. consumer price increases eased a little from Jan to Feb but still pointed to an elevated inflation rate. Prices increased 0.4% last month, just below January's 0.5% rise.
WASHINGTON — U.S. consumer price increases eased slightly from January to February but still pointed to an elevated inflation rate that is posing a challenge for the Federal Reserve at a delicate moment for the financial system.
That is a sharp shift from just a week ago, when Chair Jerome Powell suggested to a Senate committee that if inflation didn't cool, the Fed could raise its benchmark interest rate by a substantial half-point at its meeting March 21-22. When the Fed raises its key rate, it typically leads to higher rates on mortgages, auto loans, credit cards and many business loans.
Jan Hatzius, chief economist at Goldman Sachs, said Goldman now thinks the Fed's policymakers will pause their rate increases next week. Goldman had previously predicted a quarter-point hike. In a note to clients, Hatzius noted that the Fed, for now, appears even more focused on calming the banking sector and the financial markets than on fighting inflation.
The Fed may get some unintentional help in its inflation fight from the aftereffects of the collapse of Silicon Valley Bank and New York-based Signature Bank. In response, many small and medium-size banks may pull back on lending to shore up their finances. A lower pace of lending could help cool the economy and slow inflation.
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