February CPI Report: Inflation Remains Annoyingly Stubborn

Breaking News This Morning:

February CPI Inflation rate rises to 3.2%, above expectations of 3.1%. Core CPI fell to 3.8%, above expectations of 3.7%.

“What is CPI?”, “How does it impact us?” and “Why should we care?”

CPI (Consumer Price Index) tracks the changes in the price of goods and services over the last year.

Core CPI (Consumer Price Index) tracks the changes in the price of goods and services over the last year, excluding food and energy.

It measures the price increase of goods and services, which will ultimately impact the Fed's decision to make a change in the Fed Overnight Rate, which ultimately impacts interest rates. These changes affect borrowers and savers. If you are shopping for a mortgage, you will see that rates are higher than they were. On the other hand, you'll note that your savings account interest rate is higher than it was previously. 

What’s the News?

Inflation and interest rates remain a hot topic in 2024. We are now in a waiting game to see when the Fed will start adjusting rates downward. While inflation has moderated greatly from it’s peak in 2022, it remains stubborn in falling to the Federal Reserve’s target of 2% (which is a target and, quite frankly, a made up goal that has little reasoning other than it being a “goal”). The CPI release this morning marks the 35th consecutive month with inflation above 3% and the second straight increase.

The Federal Funds rate is currently in the range of 5.25% - 5.5%. The original expectation of six interest rate cuts in 2024 has swiftly dissipated, as even three rate cuts in 2024 seems optimistic in the current environment. Jamie Dimon, CEO of JPMorgan Chase said “If I were them, I would wait” in reference to the Federal Reserve cutting rates. The Federal Reserve has made it clear that they will not begin cutting rates until they are confident that inflation is heading back down towards that 2% target. With the stickiness we have seen from inflation, we would not count on a rate cut in the next few months and think interest rates being higher for a longer is a likely outcome.

This is not a great shock to what we are doing, but it gives us some guidance as to what to anticipate moving forward. We continue to monitor economic data and market trends as we make decisions in portfolios. As we always, there is no lazy asset management here at Green Ridge Wealth Planning.

Please reach out if you have any questions on the current environment or would like to touch base about your finances.

linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram