Consumer price inflation matched consensus expectations, with the headline CPI advancing 0.4% MoM in February. With that said, the focus of the report was centered on the core segment given January's strong showing and inflation there registered a still strong increase at 0.4% MoM. However, the services category did lose some momentum driven by OER normalization. 

While we maintain the view that the May FOMC meeting is still live for a rate cut, the path toward that outcome has become narrower still. With that said, we don't think today's report meaningfully changes the Fed's inclination to first ease by the June FOMC meeting. In our view, services inflation should resume a clear path toward normalization over the next few months as the tougher seasonal part of the year is already behind us.

This print does not challenge the disinflation narrative which is what will drive the Fed cutting cycle ultimately. We have shown that good US data is not necessarily good for the USD as long as it is accompanied by good rest of the world data and disinflation. That narrative still holds and can keep pushing the USD lower through Q2 and Q3.