U.S. consumer inflation fell back in February as lower fuel and food prices largely offset increases in implied rents and clothing prices. Consumer price index (CPI) figures released by the Bureau of Labor Statistics indicated seasonally-adjusted consumer prices rose by 0.2% in February, in line with expectations but lower than January’s comparable figure of 0.5%. However, on a 12-month basis, the consumer inflation rate increased from 2.1% to 2.3% (seasonally adjusted).
Financial markets reacted by sending bond yields and the USD lower, although Rex Tillerson’s dismissal as U.S. Secretary of State via Twitter was thought to have had some effect. 2 year bond yields fell by 2bps to 2.25% while 10 year and 30 year yields dropped by 3bps each to 2.84% and 3.10% respectively. The new figures did not change the likelihood of a rate increase at the next FOMC meeting and, according to federal funds futures, the probability of a March rate rise remained just under 90%.