Quick Facts
US core inflation metric came in significantly lower than expected
The release of the low numbers has sparked a flurry of activity in the Forex world
Stocks soared and the US dollar plummeted in value
US Core CPI Data Misses Expectations, Fuels Speculation of Earlier Rate Hike in March
In a surprise move, the US core inflation metric came in significantly lower than expected, sending shockwaves through the financial markets and beyond.
A Surprising Twist: Core US Inflation Below Expectations
The core inflation metric, which excludes volatile food and energy prices, came in at 0.3% in February, well below the 0.4% consensus estimate.
This unexpected dip in inflation has significant implications for the Federal Reserve’s monetary policy, with many experts now revising their expectations upwards for a March rate hike.
What Does it All Mean for Rate Hikes?
So, what does this mean for the Federal Reserve’s plans to raise interest rates in March? In a nutshell, it’s game on.
With inflation running cooler than expected, the Fed now has even more scope to hike rates without worrying about inflationary pressures.
In fact, many experts are now predicting that the Fed will hike rates as early as March, citing the low inflation numbers as further evidence that the economy can withstand higher borrowing costs.
Jim O’Sullivan, founder of macroeconomic research group Modera, said “This reading is a huge positive for the case for a March rate hike. The Fed is likely to take note of this and revisit its plans to hike rates in March.”
Bank of Japan’s Interest Rate Hike: What’s Next for the Yen?
Meanwhile, across the Pacific, the Bank of Japan is also gearing up for a rate decision of its own. Analysts are almost universally predicting that the Bank will hike interest rates next week, marking a major shift in monetary policy.
So, what does this mean for the value of the Japanese yen? In short, it’s likely to rise.
As interest rates increase, the attractiveness of Japanese assets increases, drawing in investors and boosting the currency.
Masashi Murakami, senior market analyst at Tokyo-based brokerage firm Okasan Securities, said “Given the likelihood of a rate hike, the yen is likely to strengthen against major currencies.”
Stay tuned, and stay informed!
