Inflation Ticks Up in February as Price Pressures Prove Persistent

March 14, 2024

Inflation rose more than expected in February, likely pushing the data-dependant Federal Reserve to maintain its “wait and see” approach when it comes to cutting interest rates.

The consumer price index (CPI) rose 0.4% last month from the month before, according to the Bureau of Labor Statistics. The figure matches economists’ forecasts but represents an acceleration from January’s 0.3% monthly gain. On an annual basis, CPI was up 3.2% in February. That is also an acceleration from 3.1% a month prior, but an unexpected one, as economists had been anticipating the annual rate to hold steady.

“Core” CPI, which excludes volatile components like food and energy and is considered to be a better indicator of inflationary pressure, topped expectations, climbing 0.4% month-to-month and 3.8% on an annual basis. Economists had been expecting increases of 0.3% and 3.7%, respectively.

Although core CPI decelerated slightly between January and February, the three-month and six-month annualized inflation rate accelerated to 4.3% and 3.9%, respectively. 

The topline inflation number was pushed higher by a 2.3% increase in energy costs and a 0.4% increase in shelter costs. The BLS reports that more than 60% of the month’s gain was attributable to these two categories.

This marks the second consecutive month of stronger-than-expected inflation and is likely to reinforce Fed policymakers’ cautious standing. The markets see basically no chance that the Fed will cut rates at its meeting later this month, but still widely expect cuts to begin in June. 

At next week’s Fed committee meeting, a key focus will likely be whether policymakers will continue to expect three cuts this year or whether more officials will pencil in just two cuts. The Fed has held its benchmark short-term interest rate around 5.3%, a 23-year high, since last July.

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