- US inflation eased to 2.8% in February, driven by lower housing, airfare, and gas prices, but core inflation remains high.
- The Federal Reserve kept rates steady at 4.25%-4.5%, with Powell signaling cautious optimism and slow progress towards 2% inflation.
- Tariffs continue to affect inflation, but Powell believes they won’t derail the Fed’s progress in bringing inflation down to the target.
US Inflation in the has recently displayed some easing, as noted by the core inflation being reported at 2.8%, in February, down from a 3.0% January figure. These are mainly due to softer housing costs, as well as lower airfares and gas prices. The move is towards the 2% target inflation rate set by the Federal Reserve but core inflation remains high at 3.1%, signaling that there is still inflationary pressures in the economy to some extent.
US Inflation Slowdown Impact
A slow down on US inflation is good news for the US economy indicating that some of the policies adopted by Federal Reserve in the last few months may becoming effective. Nonetheless, it should also be noted that experts continue to predict that even though the trend is positive, it is not so rosy yet. In particular, core inflation rate, which excludes food and energy prices, is still above the Fed’s target, which means that core inflation pressures are still fairly robust.
The Federal Open Market Committee kept the target range of federal funds rate steady; 4.25% to 4.5% on the 18-19 of March. The speech of Federal Reserve Chairman Jerome Powell signaled dovishness in line with concerns over global growth. Although the central bank sounded optimistic about its capability to bring back inflation to the target 2% level, Powell warned that the process to do this would be slow with no haste to raise interest rates. He also emphasized this into the consideration that even tariff as an aiding factor could cause some inflation which could compromise the intended inflation target in the long run.
Policy concerns also exist in the field of inflation because of tariffs that have been set recently due to trade disputes, which increased the prices for certain industries. Despite this optimism, Powell stated that inflation caused by tariffs is not a major threat to the progress of the economy and more will need to be done to get to two percent inflation rate.
Upcoming Regulatory Developments
In the coming days, focus will also shift to other important regulatory signals that are important in determining inflation and the economy. On March 27, Paul Atkins and Comptroller of the Currency nominee Jonathan Gould, would be appearing before the Senate Banking Committee. They could be instrumental in formulating rules for the digital asset sector in the future, despite suffering challenges in obtaining banking services from US national banks.
Although the rate of US inflation is coming down, there is still considerable uncertainty regarding the state and direction of the economy as costs and tariffs continue to impact the Federal Reserve.