Today’s CPI inflation report shows that although the pace of inflation has cooled off since last summer, it remains too-high for the Fed to stop raising rates. The CPI report should result in a fed funds rate hike at next week’s FOMC meeting and we continue to expect a 25 basis point rate hike in March. The U.S. Treasury, Federal Reserve, and FDIC recently announced this response to the recent bank failures and their intention to conduct a review of the regulatory failure. The Fed is the lender of last resort, and again demonstrated its willingness to step in to stop an unnecessary calamity by creating a new credit facility that allows banks in distress to borrow against their high credit quality holdings.

Headline CPI:

+0.4% seasonally adjusted in February, following +0.5% in January

+6.0% year-over-year

+4.0% latest 3 months annualized

Core CPI: (excludes food and energy)

+0.5% seasonally adjusted in February, following +0.4% in January

+5.5% year-over-year

+5.2% latest 3 months annualized

Series I Bond Inflation Adjustment:

The next Series I bond inflation adjustment will be announced May 1st 2023. The inflation rate will be determined by the realized change in CPI between the six month period from September 2022 through March 2023. As of today, we know the rate of change between the five month period from September 2022 through February 2023 is 1.36% semi-annual, or 2.7% annualized.

Median and 16% trimmed-mean CPI from Cleveland Fed:

Median +0.6% in February

16% trimmed-mean +0.5% in February

Summary Tables from BLS.gov CPI report:

Source: BLS.gov