Source: Bloomberg

Steve Matthews

The acceleration of the US Core Consumer Price Index (CPI) may enhance the Federal Reserve's interest rate hike determination, but as the continued financial turmoil is worrying, it will be a difficult decision regardless of the interest rate hike or not raising interest rates next week.

According to the data released by the Labor Statistics Bureau on Tuesday, in February, the core CPI of food and energy increased by 0.5%month -on -month, an increase of 5.5%year -on -year.The overall CPI rose 0.4%month -on -month and 6%year -on -year.Economists believe that compared with the overall CPI, the core CPI can better reflect the potential inflation trend.

The problem that the Fed is facing is now, which should be taken care of by inflation and financial risks.Last weekend, the regulatory authorities intervened in the consequences of the closure of the Silicon Valley Bank and announced the launch of a new mechanism to ensure that all unsure depositors deposit deposits were guaranteed.

"CPI data indicates that the Fed cannot wait to wait and see," said Derek Tang, an economist of LH Meyer/Monetary Policy Analytics."Government intervention on weekends aims to curb the financial crisis and create space for continuing to tighten monetary policy. They do not want to make choice questions between financial stability and price stability."

Although bank stocks show signs of stability, Powell and his colleagues may worry that when the failure of the failure of the closure incident can be clearly judged, it will bring risks too early to tighten the monetary policy.

In addition, the interest rate hikes of 450 base points in the past year have put pressure on the financial industry. The dilemma of Silicon Valley Bank shows that the impact of the lag effect of the past interest rate hike has begun to appear.

"The 25 -basis point of interest rate hikes is still a difficult decision for the Federal Reserve," he said, Kathy Bostjancic, the chief economist of Nationwide Life Insurance Co., said."If the signal of the financial market indicates that their emergency action on Sunday relieves financial pressure, Fed officials may be persuaded to raise interest rates by 25 base points."

However, she also pointed out that "inflation is not the only focus of the Federal Reserve, because it still needs to consider financial stability and loan conditions."

Bloomberg economist's perspective

"The CPI report in February indicates that inflation will not subscribe quickly, and the Federal Reserve still has the need to continue to raise interest rates. Raising 25 basis points in March may be a suitable move, and it will increase interest rates twice later. The interest rate peak is seen at 5.25.%"

- Anna wong, Stuart Paul

Renaissance Macro Research LLC's head of the US Economic Research Department, Neil Dutta, said the details of the CPI report did not encourage the Fed, excluding the core service industry, including housing, is still accelerating.

He wrote, "Today's CPI data reminds us that the battle between inflation is not over yet."Dutta is expected to raise 25 basis points next week. If it is not because of the Silicon Valley Bank incident, it may have been raised at 50 base points.