Fresh US data revives interest rate hike debate

In February, the US Consumer Price Index rose by 0.2 per cent.

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By :  ,  Financial Analyst

US consumer prices rebounded last month as petrol prices rose for the first time since June last year, according to new figures, which sparked speculation that interest rates could be raised early this summer.

The Consumer Price Index (CPI) rose by 0.2 per cent in February, but remained unchanged from a year earlier, the Department of Labor said. The monthly rise follows three consecutive months of declines, including a 0.7 per cent drop in January, partly due to a drop in oil prices. This led many analysts to say that the US Federal Reserve could start raising interest rates in June.

Uncertainty remains

However, Ryan Sweet of Moody's Analytics told the BBC that "global oil prices have bounced around and the appreciating US dollar will continue to put downward pressure on core prices." He added: "The February CPI doesn't increase the odds of the Fed beginning to normalise interest rates in June."

US Fed Chair Janet Yellen's said at the end of February that the central bank would be patient about raising interest rates, as the job market was still healing and inflation was too low. 

Last week, the Fed modified its stance on interest rates, dropping its "patient" language from the policy statement, and trimmed its growth and inflation forecasts.

It also said unemployment could fall further than first thought without risking a spike in inflation, and acknowledged the negative impact stemming from the strong US dollar.

Meanwhile, US non-farm payrolls – released early in March – showed that the US added 295,000 jobs in February, beating forecasts of a 235,000 increase, despite severe winter weather. 

"The biggest source of uncertainty at the moment is what will happen with the US and rates liftoff, given the country is faced with a different set of fundamentals to the rest of the world," IG strategist Stan Shamu told AP.

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