Federal Reserve policymakers may take some comfort from data on Friday showing a key gauge of inflation cooling in February, but it's far from clear if it marks enough headway for U.S. central bankers to end their year-long campaign to hike interest rates.
rose 5.0% in February from a year earlier, down from the 5.3% increase in January. A measure of core inflation - seen as a better gauge of future price increases - came in a shade lower than expected at 4.6%.
It is "early days yet in terms of assessing whether we really have gone as far as we need to go," Boston Fed President Susan Collins said in an interview on Bloomberg Television on Friday. KPMG's Diane Swonk said she estimates the latest reading puts the year-over-year rise in core services inflation at 4.6%, up from the 4.4% pace in the fourth quarter of 2022. That stickiness could prompt the Fed to do more and risk an "overshoot on rate hikes and a deeper, more scarring recession," she said.
Traders also were betting more heavily that the Fed would start cutting rates as soon as July, with the policy rate seen reaching the 4.25%-4.50% range by the end of this year, based on interest-rate contract pricing.one more quarter-of-a-percentage-point increase this year and, contrary to market expectations, they don't plan to deliver any interest rate cuts until 2024.
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