Quick review of US February PPI data
The U.S. PPI increased by 1.6% year-on-year in February, and the growth rate was higher than the expected value of 1.2%. The previous value was revised from 0.9% to 1%. The core PPI in the United States increased by 2% year-on-year in February, which was higher than the expected value of 1.9% and the same as the previous value.
The main reason for the higher-than-expected growth in U.S. PPI in February was rising fuel and food prices, further indicating that inflation is still increasing. The data shows that the road ahead for Fed policymakers seeking to make greater progress in fighting inflation will not be smooth.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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Deutsche Bank points out that as central banks in the US, Europe, and Japan are tightening policy simultaneously, the market may still be underpricing the eventual terminal rates. With oil prices remaining high, inflation may spill over into core inflation and wages. Moreover, financial conditions have not tightened in tandem, which could weaken the effect of rate hikes. Citing the experience of 2022, Deutsche Bank notes that the market then expected a total of around 200 basis points of Fed rate hikes in the first year, but the final figure exceeded 400 basis points, illustrating that the market often underestimates the terminal rate.
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