Live February Inflation Report Updates: Consumer prices rise by an inch

The consumer price index rose 3.2 percent last month from a year earlier, compared to 3.1 percent in January. That's significantly lower than the high of 9.1 percent in 2022, but still faster than the roughly 2 percent that was normal before the 2020 pandemic.

After excluding volatile food and fuel costs to better understand the underlying trend, inflation was 3.8 percent, slightly faster than economists expected but down from 3.9 percent in January. On a monthly basis, core inflation rose slightly more quickly than economists expected as airfare and car insurance prices increased, even as a closely watched housing gauge rose less quickly.

Overall, the report was the latest sign that fully bringing down inflation is likely to take time and patience.

So far, inflation has fallen steadily and relatively painlessly: unemployment remains hovering below 4%, and growth in 2023 has been unexpectedly strong, despite the Fed raising interest rates to their highest level in more than two decades. from time.

Fed officials are discussing how long they need to leave interest rates at their current level, about 5.3 percent. High borrowing costs make it difficult for people to borrow to buy a home or expand a business, and this can affect the economy over time. While the Fed tries to reduce demand enough to control inflation, officials want to avoid growth that is so overwhelming that it leads to widespread job losses or a recession.

But some economists worry that it may be harder to slow inflation the rest of the way than it has been to achieve progress so far. Fed officials want to avoid cutting interest rates too early, only to then discover that inflation has not been completely crushed.

“We don't want to have a situation where the good inflation data we got over the last six months last year turns out to not be an accurate signal of where underlying inflation is,” said Fed Chairman Jerome Powell. The president said while testifying before Congress last week. Given that, the Fed is being cautious, he said.

But Mr. Powell also said last week that when the Fed is confident that inflation has fallen sufficiently, “and we are not far from it,” it will be appropriate to cut interest rates.

The Federal Reserve aims for an annual inflation rate of 2 percent. This target is set using a separate but linked inflation index, a measure of personal consumption expenditures. This indicator includes some data from the Consumer Price Index numbers, but it comes in later.

Some economists wondered whether price increases would continue to fade smoothly. If inflation in services — things like housing and insurance — proves more stubborn than expected, it could make it difficult to completely eliminate overall price increases.

Tuesday's report offered some good news in that regard: a closely watched measure that effectively tracks the cost of renting a home owned by someone, rose more moderately. Economists were nervously looking forward to “Equivalent rent to owners“The measure rose rapidly in January.

On the other hand, primary housing rents rose slightly more quickly, by 0.5% on a monthly basis, compared to 0.4% in January.

While commodities have fallen from inflation recently, there were some exceptions in February. Clothing prices recently dropped on a monthly basis, but the cost rose last month.