Inflation slowed slightly to 2.8% in February ahead of Federal Reserve meeting

Inflation cooled slightly in February even as the pace of price growth remained well above the Federal Reserve's goal ahead of the central bank's policy meeting next week.

The Labor Department on Wednesday said that the consumer price index (CPI) — a broad measure of how much everyday goods like gasoline, groceries and rent cost — increased 0.2% in February compared with last month, while it rose 2.8% on an annual basis.

Both the annual and monthly increases in headline inflation were cooler than the expectations of LSEG economists.

So-called core prices, which include more volatile measurements of gasoline and food to better assess price growth trends, were up 0.2% from the prior month and 3.1% on an annual basis, slower than the estimates of LSEG economists.

TREASURY SECRETARY BESSENT: ‘I’M NOT WORRIED ABOUT INFLATION' FROM TARIFFS

The report showed that inflationary pressures in the U.S. economy remain persistent despite progress in bringing inflation closer to the Federal Reserve's 2% target over the past few years.

High inflation has created severe financial pressures for most U.S. households, which are forced to pay more for everyday necessities like food and rent. Price hikes are particularly difficult for lower-income Americans, because they tend to spend more of their already-stretched paycheck on necessities and have less flexibility to save money.

Food prices increased 0.2% in February. The index for food at home was unchanged over the month and up just 1.9% over the past 12 months. 

Egg prices were up 10.4% on a monthly basis in February, while meat, poultry and fish prices rose 0.5%. Prices for fruits and vegetables as well as nonalcoholic beverages declined by 0.5% in February. Dairy prices saw a larger decline of 1% for the month.

THESE ARE THE US FARM PRODUCTS THAT CHINA HAS IMPOSED TARIFFS ON

The food away from home index was up 0.4% for February and is up 3.7% over the past year.

Energy prices were up 0.2% in February — a smaller monthly increase than the 1.1% rise recorded in January. Gasoline prices were down 1% last month on a seasonally adjusted basis, while natural gas prices were 2.5% higher.

Housing costs rose in February as the shelter index increased by 0.3% for the month. That leaves the shelter index 4.2% higher than a year ago, marking the smallest 12-month increase since December 2021.

Transportation costs were down 0.8% in February, with a 4% decline in airline fares more than offsetting increases in vehicle maintenance and motor vehicle insurance — which each rose by 0.3%.

US ECONOMY ADDED 151,000 JOBS IN FEBRUARY, BELOW EXPECTATIONS

The data comes ahead of the Federal Reserve's monetary policy meeting next week, when the central bank is expected to leave interest rates unchanged for the second consecutive meeting amid uncertainty over inflation and the labor market. At its last meeting in February, the Fed left its benchmark federal funds rate at a target range of 4.25% to 4.5%.

"Today's cooler-than-expected CPI reading was a breath of fresh air, but no one should expect the Fed to start cutting rates immediately," said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management. "The Fed has adopted a wait-and-see posture, and given the uncertainty of how trade and immigration policy will impact the economy, they're going to want to see more than one month of friendly inflation data."

GET FOX BUSINESS ON THE GO BY CLICKING HERE

Markets have priced in a 99% chance of the Fed holding rates steady when policymakers meet next week on March 18-19 — up from 96% a day ago and 94% a week ago, according to the CME FedWatch tool.