US inflation held at 2.4% in February, but significant price pressures loom in March

US CPI inflation rose by 2.4% year-on-year in February, with core inflation – which excludes food and energy inflation – slightly higher at 2.5%.

Signs that inflation is stabilising would have renewed hopes for further Fed rate cuts. However, developments in the Middle East significantly complicate the outlook.

Severely restricted passage through the Strait of Hormuz and the subsequent rise in energy commodity prices have renewed price pressures for US households at the pump.

The extent to which these price rises will filter through to the wider price level will depend heavily on how long supply routes remain disrupted. For this reason, we expect the Fed to exercise caution, leaving interest rates unchanged at its upcoming meeting in March.