U.S. consumer prices cooled in February amid a decline in gasoline prices and a moderation in the cost of rental accommodation, the latest indication that an anticipated pickup in inflation probably will be only gradual.
The Labor Department said its Consumer Price Index rose 0.2 percent last month after jumping 0.5 percent in January. In the 12 months through February, the CPI rose 2.2 percent, up from 2.1 percent in January as the weak reading from last year dropped from the calculation.
Excluding the volatile food and energy components, the CPI gained 0.2 percent after accelerating 0.3 percent in January. The year-on-year increase in the so-called core CPI was unchanged at 1.8 percent in February.
Economists had forecast the CPI increasing 0.2 percent in February and the core CPI also rising 0.2 percent. The Federal Reserve tracks a different index, the personal consumption expenditures price index excluding food and energy, which has consistently undershot the central bank’s 2-percent target since mid-2012.
The CPI report came on the heels of data last Friday showing a deceleration in wage growth in February as well as a downward revision to January’s increase in average hourly earnings. Average hourly earnings rose 2.6 percent on an annual basis in February, stepping down from January’s 2.8 percent increase.
Against the backdrop of a tightening labor market and strong economy, the Fed is widely expected to increase interest rates at its March 20-21 meeting. But steady inflation gains suggest the U.S. central bank will probably not change its interest rate forecast at next week’s policy meeting.
The Fed has forecast three rate hikes this year. Many economists expect that at some point it will upgrade its projection to four rate increases this year amid optimism that the robust labor market will start boosting wage growth at least by the second half of this year. Policymakers consider the labor market to be near or a little beyond full employment.
In February, gasoline prices fell 0.9 percent after rebounding 5.7 percent in January. Food prices were unchanged, with the cost of food consumed at home dropping 0.2 percent. Food prices rose 0.2 percent in January.
The core CPI was restrained by a moderation in rents. Owners’ equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, increased 0.2 percent last month after advancing 0.3 percent in January.
Healthcare costs slipped 0.1 percent in February after advancing 0.4 percent in the prior month. Prices for hospital care fell 0.5 percent and the cost of prescription medication declined 0.4 percent.
The cost of doctor visits rose 0.2 percent. Apparel prices continued to march higher, rising 1.5 percent in February after surging 1.7 percent in January. The cost of motor vehicle insurance rose 1.7 percent last month.
Prices of new motor vehicles fell 0.5 percent, the biggest drop since August 2009, after slipping 0.1 percent in January.