The minutes from the FOMC meeting held at the close of January showed that members supported a ‘careful’ approach to any further rate cuts, and that ‘provided the economy remained near maximum employment, they would want to see further progress on inflation before making additional adjustments to the target range for the federal funds rate.’ With the economy still strong and inflation elevated, many members felt that rates could be held at a restrictive rate, though others cautioned that ‘policy could be eased if labor market conditions deteriorated…’ While members expect inflation to continue moving towards target, its path is expected to be uneven, and it was noted that businesses may pass on any higher costs related to tariffs to consumers and that immigration policies might also prove inflationary. The minutes also showed a discussion around easing off on quantitative tightening while issues around the debt ceiling are unresolved.
UK CPI inflation accelerated to 3.0% y/y in January, up from 2.5% in December and hotter than the predicted 2.8%. This marked the fastest pace of annual price growth since last March. Prices were 0.1% lower in January compared to the previous month but this was slighter than the expected 0.3% fall in prices. Core inflation was in line with expectations at 3.7% y/y, up from 3.2% the previous month, while services inflation was at 5.0%, up from 4.4% previously, driving the uptick in headline price growth. This was on the back of the introduction of VAT on private school fees and also volatile moves in the cost of airfares. Following on from the robust labour market data published the previous day, the CPI print will likely keep the BoE on the cautious side when it comes to its rate-cutting path as inflation is set to remain some distance from the target rate of 2.0% for some time.
Today’s Economic Data and Events
17:30 US initial jobless claims, week to February 15. Forecast: 215,000
Egypt overnight deposit rate. Forecast: 27.5%
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