February Inflation Report Unlikely to Deter Fed From Cutting Rates

February’s inflation report showed relatively stable price growth, matching January’s annual pace and coming in slightly below economists’ expectations.

Markets expect Federal Reserve officials to keep interest rates unchanged.

However, the data is unlikely to influence Federal Reserve policymakers as the Iran conflict threatens to drive energy and other costs higher, Megan Leonhardt and Janet H. Cho reported for Barron’s Daily.

The Consumer Price Index rose 2.4% in February from a year earlier. Excluding volatile food and energy prices, core inflation stood at 2.5%.

Economists say the report is already being overshadowed by the recent surge in oil prices. Markets expect Federal Reserve officials to keep interest rates unchanged.

What comes after that remains uncertain. February’s data reflects economic conditions before the war in Iran escalated, meaning headline inflation could rise again in March.

Bernard Yaros, lead U.S. economist at Oxford Economics, said stronger headline inflation is likely in the coming months as energy prices feed through the economy.