February Inflation Stays High, Fed Rate Hike Concerns Mount

This data, delayed by a government shutdown, showed core inflation, excluding volatile food and energy, also increased 0.4% from January and was 3% higher year-over-year, a slight decrease from January's 3.1%. These monthly increases significantly surpass the Fed’s 2% inflation target.

Kathy Bostjancic, chief economist at Nationwide, stated that inflation was firming before the Middle East conflict and is "primed to jump sharply higher in March." This outlook heightens concerns at the Federal Reserve, making interest rate cuts improbable and potentially leading to rate hikes. The Commerce Department reported Americans' incomes slipped 0.1% in February, the first decline since October, while inflation-adjusted spending barely increased, eroding purchasing power.

The upcoming March Consumer Price Index report is expected to reflect the Iran war's impact, forecasting a 0.9% monthly increase and a 3.4% annual gain, further challenging the Fed's inflation goals.