Prime Highlights:
The U.S. annual inflation rate dropped to 2.8% in February, lower than the expected 2.9%.
The Consumer Price Index (CPI) rose by 0.2% month-over-month, slightly below economists’ predictions of 0.3%.
Key Background:
The U.S. inflation rate moderated in February, easing to 2.8%, which was lower than economists’ expectations, according to the latest report from the Bureau of Labor Statistics. This marks a slight decline from January’s annual inflation rate of 3.0%. The Consumer Price Index (CPI), a broad measure of inflation, rose by 0.2% month-over-month, which also came in below analysts’ projections of 0.3%.
Core inflation, which excludes volatile food and energy prices, showed a similar pattern, increasing by 0.2% in February, with the annual rate falling to 3.1%. This was a reduction from January’s 3.4% and also lower than the 3.2% forecasted by economists. The February report provided some relief, especially as businesses and consumers remained concerned about potential inflationary pressures from tariffs on imports.
Shelter costs continued to be a significant contributor to the CPI increase, though they rose at a slower pace compared to January, advancing by 0.3%. The annual increase in shelter costs, which make up a large portion of the CPI, slowed to 4.2%, the smallest annual rise since December 2021. Food and energy prices both rose by 0.2%, with notable price increases in eggs and used vehicles. Energy prices remained relatively stable, with the price of gasoline rising 0.6%. On the other hand, airline fares dropped by 4%, providing some relief to consumers.
The report also showed inflation-adjusted hourly wages grew by 0.1% for the month, although they were up just 1.2% year-over-year. Despite these moderate increases, concerns about the potential long-term impact of tariffs and ongoing trade tensions remained, influencing market sentiment. Federal Reserve officials will likely remain cautious, with expectations that the central bank could resume rate cuts later this year, especially if economic growth continues to weaken.
