The Federal Reserve’s key measure of inflation stayed steady in February, despite the US central bank’s latest interest rate hike.
The core personal consumption expenditure index increased by 1.8 per cent over the year to March, according to the US Bureau of Economic Analysis, unchanged from January.
The headline rate, which includes the effects of volatile components such as food and fuel, rose by 2.1 per cent.
The Federal Reserve targets a rate of two per cent, but its latest public predictions say it will hit 1.9 per cent only in the fourth quarter of this year.
The rate-setting Federal Open Market Committee (FOMC) raised its federal funds rate at its last meeting on 15 March.
However, the more measured rhetoric of FOMC chair Janet Yellen prompted a drop in the dollar as investors anticipated fewer rate hikes this year than had been priced in.
Yellen said further tightening will only be “gradual,” while refusing to upgrade the Fed’s growth forecasts.
The dovish turn has prompted investors to bet against a rate hike at the next FOMC meeting on 3 May. Calculations by CME Group show the probability of rates staying unchanged at 93.6 per cent, according to the purchases of federal fund futures, which offer protection against interest rate rises.
However, the odds of a rate hike on 14 June stand at 54.7 per cent. This would be the third interest rate rise in the US since October, leaving another six months for a fourth hike on the path to policy normalisation.