In this morning’s data, the Consumer Price Index (CPI) increased 0.3% in February, as expected. On an annual basis, it grew 2.4%, also as expected and the same as the annual increase in the previous month. The core rate, which excludes prices for food and energy, increased 0.2% in February, as expected, and slightly less than the previous month. The core rate grew 2.5% on an annual basis, as expected, and the same as the previous month’s annual measure.
Looking at the individual categories, monthly prices for Fuel Oil, up 11.1% and Apparel, up 1.3%, were relatively strong while monthly prices for Electricity, down -0.7%, and Used Cars and Trucks, down -0.4%, were relatively weak. Prices for Shelter were up 0.2%, the same as the previous month.
Overall, CPI increased as expected in February for both the headline and the core measures. Prices were elevated for fuel oil and apparel, but that was offset somewhat by prices for electricity and used cars and trucks. The increase in apparel reminds us that tariff impacts are still rolling through the supply chain. Meanwhile, energy prices have increased in recent days given the conflict with Iran, but it remains to be seen how long the upward pressure will last.
The annualized core rate remains above the Federal Reserve’s 2.0% target. Ongoing tariff impacts and a spike in energy prices that could seep into other areas do not help with this dynamic. Coupled with a weaker labor market, as denoted in last week’s payrolls report, the Federal Reserve board will have a lot to consider at its upcoming meetings.
In all, the 10-year US treasury yield ticks higher following the report and equity futures are lower as we head into the market open.
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