Consumer prices rose in February as Biden's spending plan sparks inflation fears
Consumer price index rose 0.4% in February
JPMorgan chief global strategist David Kelly discusses the impact the $1.9T COVID stimulus bill and higher wages may have on inflation.
The cost of U.S. consumer goods and services accelerated in February as a surge of government stimulus raised fresh concerns about runaway economic growth and a rise in inflation.
The consumer price index rose 0.4% in February, according to new data released by the Labor Department on Wednesday morning, or up 1.7% on an annual basis. That compares to a 0.3% increase in January, and a 1.4% rise on an annual basis.
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It marked the biggest annual gain in a year, although inflation remained well-below pre-pandemic levels at 1.7%.
Inflation fears, driven in part by a rise in Treasury bond yields, have rattled Wall Street in recent weeks, with some investors worried that it could prompt the Federal Reserve to pump the brakes and tighten monetary policy sooner than expected.
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The Fed likes inflation to run around 2%, although it adopted a new strategy over the summer in which it will keep the benchmark federal funds rate near zero, even if inflation rises above the preferred rate. Chairman Jerome Powell acknowledged last week during a Wall Street Journal conference that policymakers expect to see a "transitory increase in inflation," but said he expects the central bank to be patient.
“We monitor a broad range of financial conditions and we think that we are a long way from our goals,” Powell said. “I would be concerned by disorderly conditions in markets or persistent tightening in financial conditions that threatens the achievement of our goals.”