"June Interest Rate Cut Effective... February CPI Impact Minimal"

Focus on easing price pressures in the service sector
Deflationary trend expected to resurface
Despite February CPI exceeding forecasts, rate cut expectations remain
S&P 500 closes higher, hitting an all-time high

[Image source=Yonhap News]

Hi Investment & Securities analyzed on the 13th that the U.S. Consumer Price Index (CPI) for February "exceeded expectations by 0.3%, but it is not enough to significantly shake the Federal Reserve's (Fed) June interest rate cut."

Researcher Park Sang-hyun of Hi Investment & Securities stated, "Despite the February CPI data, the possibility of a June rate cut remains valid."

The U.S. CPI for February rose 0.4% month-over-month, in line with market expectations. However, the core CPI increased by 0.4% month-over-month, surpassing the market expectation of 0.3%. Despite exceeding expectations, the Standard & Poor's 500 (S&P 500) index rose about 1.1% compared to the previous day, closing again at an all-time high.

Researcher Park explained, "The main reason the stock market was largely unfazed is that the February CPI data is interpreted as not being significant enough to disrupt the Fed's June rate cut." He added, "Although inflation remains stickier than expected, signals that inflationary pressures are easing have been confirmed in some inflation indicators."

Regarding the super core CPI (inflation excluding housing, energy, and food), which the Fed pays close attention to, the increase in February was 0.47% month-over-month, significantly slowing compared to January's 0.85%. Additionally, rent prices within service inflation rose 0.4% in February, down from 0.6% in January.

Researcher Park evaluated, "Considering that last week's announced wage growth slightly missed market expectations, we have begun to confirm in several areas that inflationary pressures in the service sector are easing."

He continued, "There is a high probability that the remaining two consumer inflation indicators before the June Federal Open Market Committee (FOMC) meeting will confirm signals that the disinflation trend is regaining momentum." He diagnosed, "The maintained probability of a June rate cut even after the February CPI announcement reflects this market expectation."