U.S. Consumer Prices Surge in February, Signaling Persistent Inflation Pressure
According to the latest data from the Labour Department’s Bureau of Labour Statistics (BLS), the Consumer Price Index (CPI) climbed by 0.4 percent last month, following a 0.3 percent rise in January. Notably, gasoline and shelter expenses, which encompass rents, accounted for over 60 percent of the CPI’s monthly upswing.
Over the past 12 months through February, the CPI surged by 3.2 percent, compared to a 3.1 percent increase recorded in January. While this marks a slowdown from the peak of 9.1 percent observed in June 2022, recent months have shown stagnant progress in inflation reduction.
Economists surveyed by Reuters had projected a 0.4 percent monthly increase in the CPI, along with a 3.1 percent year-on-year rise. The annual inflation rate has decelerated, but challenges persist, particularly with the methodology adjustments affecting the calculation of owners’ equivalent rent (OER) and rent data.
Stephen Juneau, an economist at Bank of America Securities, highlighted potential discrepancies between OER and rent inflation, noting a likelihood for OER inflation to surpass rent inflation moving forward. However, Juneau emphasized that much of the divergence observed was likely noise rather than a significant trend.
Excluding volatile food and energy components, the core CPI also rose by 0.4 percent last month, mirroring January’s increase. Over the 12-month period through February, the core CPI advanced by 3.8 percent, marking the smallest year-on-year increase since May 2021.
The Federal Reserve closely monitors personal consumption expenditures price indexes for its inflation target of two percent, with these measures exhibiting more subdued rates than the CPI. Despite accelerated job growth in February, concerns linger as the unemployment rate rose to a two-year high of 3.9 percent, while annual wage inflation moderated.
Prior to the CPI release, financial markets had indicated a roughly 70 percent probability of a rate cut by the Fed in June. Since March 2022, the U.S. central bank has hiked its policy rate by 525 basis points, currently standing at the 5.25-5.50 percent range.
