The Labor Department’s report on the consumer price index, released on Tuesday, showed that annual inflation in the US dropped for the eighth consecutive month in February, from a peak of more than 9 percent in the summer of last year, to 6 percent.
This figure is the lowest inflation rate since September 2021, and was in line with economists’ expectations.
The Federal Reserve has been raising interest rates over the past year in an attempt to cool the economy and control inflation, but the recent banking crisis has forced it to reconsider this strategy.
The collapse of Silicon Valley Bank in California and Signature Bank in New York led to the Fed taking emergency action, which may have a significant impact on its plans to hike rates.
Excluding the volatile food and energy components, the core CPI gained 5.5 percent last month, and both the all-items index and core CPI rose 0.4 percent from January to February.
Despite these new inflation numbers, Wall Street’s main stock indexes rose solidly in premarket trade.
The report was published amidst financial market turmoil triggered by the banking crisis, and shortly before the Fed’s policy meeting next Tuesday and Wednesday.
The report was also followed by a labor market report last Friday, which showed cooling wage inflation, but still a tight labor market.
Economists have emphasized the importance of Tuesday’s report for policymakers, despite the recent financial market turbulence.
Fed Chair Jerome Powell’s recent remarks led financial markets to expect a half-percentage-point rate increase next week, but these expectations have since been dialed back to 25 basis points.