In February, American households experienced a second month with rapidly increasing prices. This undermines the claims of the Biden administration that their policies are reducing inflation. It also dampens hopes for a Fed interest rate cut within the next few weeks.
The Consumer Price Index rose by 0.4 percent, faster than January’s increase. This is the fourth consecutive month of increases. The headline index has increased by 3.2 percent compared to a year ago, which is a higher increase than the 3.1 percent annual gain that was recorded in January.
Economists predicted a 0.4 percent rise in the monthly figure but believed the annual figure to be a bit lower at 3.1 percent.
The Federal Reserve said it was looking for more data that would give it greater confidence that inflation will be reduced to two percent. The fact that inflation rose in February makes it difficult to believe that prices will continue to fall. Data suggests that Fed officials may delay reducing rates until the summer, or even longer.
The core consumer prices index, which excludes volatile energy and food prices, increased by 0.4 percent. This was the same as the January figure, and it exceeded the consensus estimate of a decline of 0.3 percent. Core prices have increased by 3.8 percent compared to a year earlier. This is below January’s 3.9 percent but above the forecast of 3.7 percent.
Core service prices (excluding energy-related services) rose by 0.5 percent. This was in line with expectations, and lower than the 0.7 percent recorded in January. Core services prices have risen 5.2 percent for the year.
The prices of core goods had fallen last year, which held down the overall inflation. From June to January, the index of goods without food or energy decreased month-to-month. Core goods prices, however, rose by 0.1 percent in February. Most analysts did not expect this. Comparing the price of goods to a year earlier, it is down by 0.3 percent.
The January spike was not an aberration, but rather a sign of the strong inflationary pressures that remain.
The report has a silver lining: food prices were unchanged for the entire month. The price of groceries was unchanged in February after a rise of 0.4 percent. Restaurant prices increased by 0.1 percent – a slight decrease from January’s 0.5 percent.
Jerome Powell, Fed chair, has stated that he is interested in a portion of the inflation index that’s been dubbed “super core”, i.e. core services without shelter. The index rose by 0.5 percent (0.47 unrounded percent), down from 0.85 in January, but still too high for Powell to be comforted.
The housing prices rose rapidly, pushing up the shelter index by 0.4 percent in a month and 5.7 percent compared to a year earlier. The rise was slower than the January increase of 0.6 percent. Rent inflation increased to 0.5 percent, up from 0.4. A measure called the “owners’ equivalent of rent” decreased to 0.4.
