Consumer prices in the United States picked up last month, a sign that inflation remains a persistent challenge for the Federal Reserve, which is counting on a steady easing of price pressures this year.
Prices rose 0.4% from January to February, higher than the previous month’s figure of 0.3%, the Labor Department said Tuesday. Compared with a year earlier, consumer prices rose 3.2% last month, faster than January’s 3.1% annual pace.
Excluding volatile food and energy prices, so-called “core” prices also climbed 0.4% from January to February, matching the previous month’s increase and a faster pace than is consistent with the Fed’s 2% target. Core inflation is watched especially closely because it typically provides a better read of where inflation is likely headed.
Pricier gas pushed up overall inflation, with pump prices rising 3.8% just from January to February. Grocery prices, though, were unchanged last month and are up just 1% from a year earlier. The cost of clothing, used cars and rent also increased in February, raising the inflation figure.
By contrast, prices for dental care, car repairs, and other services are still rising faster than they did before the pandemic. Car insurance has shot higher, reflecting rising costs for repairs and replacement. And after having sharply raised pay for nurses and other in-demand staff, hospitals are passing their higher wage costs on to patients in the form of higher prices.
Fed Chair Jerome Powell signaled in congressional testimony last week that the central bank is getting closer to cutting rates. After meeting in January, Fed officials said in a statement that they needed “greater confidence” that inflation was steadily falling to their 2% target level. Since then, several of the Fed’s policymakers have said they believe prices will keep declining. One reason, they suggested, is that consumers are increasingly pushing back against higher prices by seeking out cheaper alternatives.
Most economists expect the Fed’s first rate cut to occur in June, though May is also possible. When the Fed cuts its benchmark rate, over time it reduces borrowing costs for mortgages, car loans, credit cards and business loans.
Of course, if the Fed keeps rates too high for too long, then it could constrict economic growth. GDP growth was a steady 2.5% last year.
The Horn editorial team