Inflation Remains Tepid, But May Increase Soon

March 11, 2021

U.S. consumer prices were up slightly in February, driven mostly by higher energy and gasoline costs. The consumer price index, which tracks the cost of everyday items from food and fuel to clothing and cars, increased by a seasonally adjusted 0.4% in February from the month prior, according to the Labor Department.

The increase was driven primarily by gasoline prices jumping 6.4% for the month, and electricity and natural gas increasing by 3.9%. 

The so-called “core” index, which strips out volatile components like food and energy, was up just 0.1% for the month and 1.3% year over year. 

The passage of a $1.9 trillion stimulus package and a rise in vaccinations may mean that we will see a big increase in prices in the coming months. Some economists worry that mounting inflationary pressures could lead to runaway price increases that may be difficult to reign in, and that the Federal Reserve may be spurred to act on interest rates and asset purchases, potentially upending an economy still in recovery.

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