Inflation balances out

On the heels of a slightly stronger measure of consumer inflation, markets got one slightly lower than expected. 

A few weeks ago, the February Consumer Price Index rose 0.4% from January, a tick above the consensus forecast for 0.3%. Core CPI, which excludes food and energy prices because they tend to be volatile, was also warmer than the Federal Reserve wants to see. But Friday, the release of February’s Personal Consumption Expenditures Index was softer than expected, slipping 0.3% from January, cooler than the projected 0.4%.

Taken all together, the result affirms the Federal Open Market Committee’s (FOMC) recent decision to stay the course on rates. The updated Summary of Economic Projections (SEP) did not sway from its December prediction it will deliver 75 basis points of cuts this year. Other factors include an economy that continues to be in decent shape and a labor market that is resilient. In fact, the FOMC forecasted improvement for both from its December SEP. Consumer confidence is in harmony, as the University of Michigan sentiment report indicated consumers expect inflation to decline.