The prices consumers pay for a wide range of goods and services rose in line with expectations in February, offering a final glimpse of inflationary pressures before an oil shock linked to the Iran war roils the outlook.
Bureau of Labor Statistics data released Wednesday showed the consumer price index rose a seasonally adjusted 0.3% for the month, putting the 12-month inflation rate at 2.4%. Both numbers matched the Dow Jones consensus forecast.
Stripping out volatile food and energy prices, core CPI posted a 0.2% monthly reading and a 2.5% annual rate, compared with forecasts for 0.2% and 2.5%, in line with estimates.
Annual rates were unchanged from January, suggesting inflation is well above the Federal Reserve’s 2% target but not worse.
The report showed inflation was broadly stable, with prices for shelter and services rising modestly while several goods categories, including used vehicles and auto insurance, fell.
Shelter, the single-largest component of the CPI, posted a 0.2% increase, keeping the annualized rate at 3%. In the category, rents rose just 0.1%, the smallest monthly increase since January 2021.
Apparel prices, sensitive to tariff pressures, saw a 1.3% monthly gain. New vehicle prices were steady and up just 0.5% from a year ago while energy rose 0.6% and saw a 0.5% annual increase.
Food prices accelerated 0.4% for the month and were up 3.1% from a year ago. Egg prices fell 3.8%, putting the annual decline at 42.1%.
Markets reacted little to the report, with stock market prospects mixed and Treasury yields higher.
The data comes ahead of a recent rise in oil prices linked to escalating tensions involving Iran, meaning any fallout from higher energy costs could be seen in the coming months.
The US-Israeli attack on Iran changed the perspective dramatically, at least temporarily.
After the attack, crude oil rose sharply amid fears of supply disruptions in the Middle East.
Higher oil prices could complicate the inflation outlook in the coming months, as increases in gasoline and other fuel products filter through transportation, shipping and a wide range of consumer goods. Sustained gains in crude prices can quickly show up in headline inflation even if underlying price pressures remain stable.
However, economists generally view such measures as temporary and likely to subside once the situation in Iran cools down. Crude prices were well off their highs after falling more than $100 a barrel on Monday, but were up nearly 4% in Wednesday’s trading.
From the Federal Reserve’s perspective, the February CPI report will put the central bank on hold as it watches how a series of interest rate cuts last year and current geopolitical tensions affect the economic outlook. According to CME Group’s FedWatch tool, traders expect the next rate cut to come in September and are assigning a 43% chance of a second move before the end of the year.
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