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US inflation fell more than expected to 2.8 per cent in February, potentially paving the way for earlier interest rate cuts by the Federal Reserve.
Wednesday’s annual consumer price index figure was below both January’s 3 per cent and the 2.9 per cent expected by economists, according to a Reuters poll.
Core inflation rose by 3.1 per cent, falling short of expectations of a 3.2 per cent increase.
Stock futures extended gains on Wednesday as investors bet the Fed will cut rates faster. S&P futures were up 1.4 per cent, compared with 0.8 per cent before the figures.
A measure of the dollar’s strength against a basket of six other currencies was up 0.3 per cent.
The US central bank faces a difficult balancing act as it tries to restrain inflation without triggering a recession, amid intensifying fears that President Donald Trump’s aggressive economic agenda is hampering growth.
Businesses and financial markets have been rattled by the chaotic rollout of Trump’s tariffs on the US’s biggest trading partners, which has been marked by a series of sudden escalations and U-turns.
Last week, Fed chair Jay Powell played down concerns over the health of the US economy after all of the S&P 500 index’s post-election gains were wiped out following the release of disappointing employment figures for February.
Powell suggested that he expected the central bank to hold interest rates at their current range of between 4.25 per cent and 4.5 per cent at its meeting next week, saying the Fed was in no “hurry” to cut and was “focused on separating the signal from the noise as the outlook evolves”.
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