February inflation was pegged at 7.9%, the highest since 1982, and is likely to rise even further thanks to record high gas prices and surging global crude.
Updated at 8:45 am EST
U.S. inflation accelerated to the fastest pace in four decades again last month, data from the Bureau of Labor Statistics indicated Thursday, with the recent surge in oil and gas prices linked to Russia’s war on Ukraine likely to keep rates elevated well into the second half of the year.
The headline consumer price index for the month of February was estimated to have risen 7.9% from last year, up from the 7.5% pace in January and the fastest rate since June of 1982, powered largely by energy, shelter and services costs. On a monthly basis, inflation was up 0.8%, the BLS said, with both tallies matching Wall Street forecasts.
So-called core inflation, which strips-out volatile components such as food and energy prices, rose 0.5% on the month, and 6.4% on the year, the highest since February of 1991, the report noted, with the annual reading coming in ahead of the Street consensus forecast.
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U.S. stocks briefly pared earlier declines in the wake of the data release, with the Dow Jones Industrial Average indicating a 350 point opening bell decline and the S&P 500 priced for a 44 point pullback.
Benchmark 10-year U.S. Treasury bond yields, while 2-year notes traded at 1.704%. Meanwhile, rose to 1.985% while the US dollar index, which tracks the greenback against a basket of six global currencies, fell 0.03% to 97.984.
The faster-than-expected reading will add further complications to the Federal Reserve’s effort to tame inflation pressures with rate hikes, given the impact of Russia’s war on Ukraine on commodity and energy prices that interest rates alone will be unable to mollify.
Furthermore, an aggressive move by the Fed could choke off growth prospects in the world’s largest economy, were investors are already growing concerned over the slow return of millions of workers to the job market, as evidenced by yesterday’s JOLTS report, and worrying signals of recession from the bond market, where the yield gap between 2-year and 10-year note yields has fallen to a pandemic-era low of 26.6 basis points.
The CME Group’s FedWatch tool is showing a 97.8% chance of a 25 basis point rate hike in March, but less than a 47% chance of follow-on moves in both May and June.
The Atlanta Federal Reserve’s GDPNow forecasting tool, a real-time benchmark, suggests U.S. economic growth has now slowed to a 0.5% clip, down from the 7% growth rate recorded over the three months ending in December.
