February CPI Report Analysis

This month's Consumer Price Index Report has become one of the most important ones in recent memory as the economic environment shifts on its head.

Graph of inflation rate, with recent data marked my arrow (New York Times).

Having been released by the Bureau of Labor Statistics on 8:30 AM EST on Wednesday, the results shook the markets by storm. Having previously made a small rally out of hopes of good results within the economy, inflation results proved more than underwhelming, with inflation rising 3% over the previous year, up from 2.9% from December.

This is worrying news for the Federal Reserve. The Fed, which previously aimed at massive rate cuts, now will be forced to take a more passive approach to cuts, with the latest one not coming for up to a few months.

The high rates which has become prominent in the United States over the past few years have slowed GDP and stock market growth, with many stocks plateauing at very similar levels, especially in the Russell index. Small businesses in particular have suffered tremendously from rates; being forced to take out massive loans to compete in an increasingly strenuous and irregular market, they will have to bay much higher rates than previously.

This problem became a key target for the Trump campaign. Fighting for both rate cuts as well as credit card rate caps, Trump cruised to victory through the grievances of the mass of the low-income bracket <$50,000, winning them by a slim majority and flipping significantly low-income states like Michigan and Wisconsin.

Now, Fed Chair Jerome Powell said that the Fed would take their time and they are in "no hurry" to enact rate cuts.

President Donald Trump.

Now, with inflation high and the possibility of a voluntary rate cut by Fed Chair Powell marginal, the Fed may now collide with the interests of the Trump administration. The president, in a hurry to downplay the severity of the rising inflation, labeled it "Biden Inflation" on his social media platform TruthSocial. "BIDEN INFLATION UP!," he said.

The leader of the free world added, "Interest Rates should be lowered, something which would go hand in hand with upcoming Tariffs!!!"

It is uncertain how the Fed will approach interest rate cuts, but it is certain that Powell will not be removed from his position by Trump, keeping his influence in the future economic decisions of the United States.

Markets sank on Wednesday in reaction to the latest CPI results. The S&P is down 0.2% and the Dow fell 0.4%.