Re: CPI inflation rate slows to 6% in February

Core CPI, ex-food and energy, was up 0.5% month-on-month, above the average economist’s forecast and the biggest advance in five months. Housing was a large contributing factor and a component that lags current conditions considerably.

Without the recent banking crisis, the Federal Reserve would most certainly continue to hike based on this hot data, but now it must account for the financial stability of the banking system in making its decision.

There is still more than a week until their decision, the market could calm down as the Fed’s backstop announced Monday begins to work. That could be enough for the Fed to continue to hike, but another bank failure (even a non-US one) might cause the Fed to pause.

Once the Fed pauses, it will be difficult for them to resume hiking and that could weigh in their decision.

Whether the Fed views the banking crisis as a short-term or long-term issue may determine their path for the rest of 2023. It will be key to watch the new quarter economic projections that will be released with their rate decision for clues on their economic view.