US consumer price increases eased slightly from January to February but still pointed to an elevated inflation rate that is posing a challenge for the Federal Reserve.
But it’s unclear whether that will be enough to stave off a broader crisis. Many economists now expect the Fed to slow its rate hikes - or stop them altogether - when it meets next week.
Barclays, which last week had beefed up its forecast to account for a half-percentage-point interest rate increase this month, now expects the Fed to hold off entirely until it’s clear that financial markets are on steady footing. Still, even with higher interest rates, inflation won’t sink to normal levels unless the economy slows further. Testifying on Capitol Hill last week, Fed chairman Jerome Powell said cooling in the economy appeared to have “partly reversed” based on recent data on jobs, consumer spending, production and inflation, suggesting the central bank could keep raising interest rates more aggressively than officials previously anticipated.
Officials will have plenty of data to comb through before making their decision. Last week, government data showed employers added 311,000 jobs in February, putting the unemployment rate at 3.6 per cent. While a tight labor market is often a sign of a healthy economy, this one is considered too tight, with far more job openings than people looking for work.
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