U.S. consumer prices rise in line with expectations in February, Fed likely to hike rates in H2 2019

U.S. consumer prices came in line with market expectations in February. On a sequential basis, consumer prices were up 0.2 percent. On a year-on-year basis, headline inflation rose modestly by 1.5 percent, the softest rate since September 2016. Price pressures in the core came in a bit weaker than anticipated, up only 0.1 percent in February. A fall in core goods prices mainly drove the softness in core rate. Prices dropped for new and used vehicles, prescription drugs, and recreation. Inflation for core goods continued to be in positive territory on a year-on-year basis.

Inflation pressures for core services continued to be stable, rising 0.2 percent in February. The main shelter category rose 0.3 percent in February, and is up 3.4 percent on a year-on-year basis. Core services rose 2.7 percent year-on-year, and have been easing from a high of 3.1 percent last summer. In all, core inflation also slowed to 2.1 percent year-on-year. Core inflation, has been at or above 2 percent for a year now. Food inflation rose 0.4 percent sequentially and 2 percent year-on-year.

Inflation pressures continued to be well behaved in February. There are a few signs that inflation presents a threat to the Fed’ current wait and see monetary policy stance, noted TD Economics in a research report.

“We expect the U.S. economy to remain resilient, and that the next Fed hike is likely to come in the latter half of this year”, added TD Economics.

At 15:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was bearish at -79.0827 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex