Announced this morning, the Consumer Price Index (CPI) increased 0.2% in February, less than expected and is three tenths lower than the previous month’s increase. It grew 2.8% on an annualized basis. The core rate, which excludes prices for food and energy, also increased 0.2% in February, less than expected and two tenths less than last month’s increase. It grew 3.1% on an annual basis, less than the previous month.
Looking at the individual categories, monthly prices for Utility Piped Gas Service, up 2.5%, were relatively strong while monthly prices for Gasoline, down -1.0%, and Transportation Services, down -0.8%, were relatively weak. Prices for Shelter were up 0.3%, which is one tenth lower than last month.
Overall, both the headline and core CPI measures increased less than expected in February and were less than the previous month. Gasoline prices fell, affecting the headline measure and hopefully giving some respite to consumers and the decrease in prices for transportation services helped the core measure. Inflation appears to be moderating but the core rate on an annualized basis is still above the Federal Reserve’s stated 2% annual target.
These data points follow last week’s payrolls report indicating the labor market is softer than it has been in previous months but is still hanging in there. Considering the added uncertainty of the impact of tariffs and some evidence of a stretched consumer, markets have been on edge as the Federal Reserve contemplates the direction of monetary policy at their upcoming meeting.
In all, the 10-year US treasury yield initially ticks lower following the report but is now little-changed and equity futures are higher as we head into the market open.
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