US February core CPI 3.8% y/y versus 3.7% y/y expected

Headline measures:

• CPI y/y +3.2% versus 3.1% expected
• Prior y/y 3.1%
• CPI m/m +0.4% versus +0.4% expected
• Prior m/m 0.3%

Core measures:

• Core CPI m/m +0.4% versus +0.3% expected. Last month 0.4%
• Unrounded core was +0.358%
• Core CPI y/y 3.8% versus 3.7% expected. Last month was 3.9%
• Shelter +0.4% versus +0.6% last month
• Shelter y/y +5.7% vs +6.0% prior
• Services less rent of shelter +0.6% m/m vs +0.6% prior
• Real weekly earnings 0.0% vs -0.3% prior (revised to -0.4%)
• Food 0.0% m/m vs +0.4% m/m prior
• Food +2.2% y/y vs +2.6% y/y prior
• Energy +2.3% m/m vs -0.9% m/m prior
• Energy -1.9% vs -4.6% y/y prior
• Rents +0.5% m/m vs +0.4% prior
• Owner’s equivalent rent +0.4% vs +0.6% prior
• Full report

USD/JPY was trading at 147.49 with US 2-year yields at 4.54% ahead of the data. The Fed funds market was pricing in 89 bps in cuts this year.

This isn’t a great report. One thing that stands out is that owner’s equivalent rent was higher again, along with rent. Those components and the jump in energy were a big part of the February inflation rise.

Airfares rose 3.6%, vehicle insurance rose 0.9% and used vehicles rose 0.5% while medical care fell 0.1%.

The 3-month annualised rate rose to 4.1% in Feb from 3.9% in Jan; the 6-month annualised rate rose to 3.8% from 3.5%.

The US dollar initially rose 40-60 pips on the headlines but has quickly reversed and USD/JPY is below pre-release levels at 147.28. It seems as though the market has seen enough to be able to look through higher prices.

On 3-month annualized basis, CPI core services ex-housing (“supercore”) increased by 6.9% in February.

This article was written by Adam Button at www.forexlive.com.