Newsroom
Inflation remains flat in February; NAFCU's Long predicts another rate cut
On a seasonally-adjusted basis, overall consumer prices increased 0.1 percent in February, matching January's growth. The Bureau of Labor Statistics reported that the overall consumer price index (CPI) grew 2.3 percent over the 12-month period.
Based on the slowing growth and anticipated effects of the coronavirus on the economy, NAFCU Chief Economist and Vice President of Research Curt Long, in a new Macro Data Flash report, shared his expectation that the Federal Reserve will issue another 50-basis point rate cut during next week's Federal Open Market Committee meeting.
Earlier this month, the Federal Reserve cut interest rates by 50 basis points in efforts to mitigate the potential economic effects of the coronavirus, setting the federal funds target rate at a range of 1 to 1.25 percent.
However, Long noted that PCE inflation, the Fed's preferred measure of price growth, "is lower than CPI and remains below the Fed's 2-percent target."
"Economic theory does not provide an easy answer as to the effect of coronavirus on inflation," wrote Long. "A supply shock tends to increase price pressures, while a demand shock tends to lower them.
"Before the virus spread much beyond China, most of the focus was on the former, but lately there has been more agreement that the demand-side effects will swamp any supply-side pressures," he added.
Core prices (excluding food and energy costs) increased 0.2 percent in February. Year-over-year core CPI growth was 2.4 percent.
Energy prices fell during the month, decreasing 2 percent. From a year ago, energy prices were up 2.8 percent. Food growth was up 1.8 percent on a year-over-year basis.