WASHINGTON: US consumer price growth slowed in February amid a decline in gasoline prices and a moderation in the cost of rental accommodation, the latest indication that an anticipated pick-up in inflation probably will be only gradual.
The Labour Department said on Tuesday (Mar 13) its Consumer Price Index rose 0.2 per cent last month after jumping 0.5 per cent in January.
In the 12 months through February, the CPI rose 2.2 per cent, up from 2.1 per cent in January as the weak reading from last year dropped from the calculation.
Excluding the volatile food and energy components, the CPI gained 0.2 per cent after accelerating 0.3 per cent in January. The year-on-year increase in the so-called core CPI was unchanged at 1.8 per cent in February.
"While there is evidence of building inflationary pressures in certain components, the annual growth rates, especially for the core CPI, do not suggest a breakout in inflation yet," said Ben Ayers, senior economist at Nationwide, in Columbus, Ohio.
Last month's increase in consumer prices was in line with economists' expectations. The Federal Reserve tracks a different index, the personal consumption expenditures price index excluding food and energy, which has consistently undershot the central bank's 2 per cent target since mid-2012.
The CPI report came on the heels of data last Friday showing a deceleration in wage growth in February as well as a downward revision to January's increase in average hourly earnings. Average hourly earnings rose 2.6 per cent on an annual basis in February, stepping down from January's 2.8 per cent increase.
The dollar pared gains versus the yen and extended losses against the euro. Prices for US Treasuries were trading higher. US stock index futures rose.
Against the backdrop of a tightening labour market and strong economy, the Fed is widely expected to increase interest rates at its Mar 20-21 meeting. But steady inflation gains suggest the US central bank will probably not change its interest rate forecast at next week's policy meeting.
The Fed has forecast three rate hikes this year. Many economists expect that at some point it will upgrade its projection to four rate increases in 2018 amid optimism that the robust labour market will start boosting wage growth at least by the second half of this year. Policymakers consider the labour market to be near or a little beyond full employment.
The jobless rate is at a 17-year low of 4.1 per cent and economists expect it to drop to 3.5 per cent by year-end. A weakening dollar and fiscal stimulus in the form of a US$1.5 trillion tax cut package and increased government spending are also seen spurring inflation.
In February, gasoline prices fell 0.9 per cent after rebounding 5.7 per cent in January. Food prices were unchanged, with the cost of food consumed at home dropping 0.2 per cent. Food prices rose 0.2 per cent in January.
The core CPI was restrained by a moderation in rents. Owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, increased 0.2 per cent last month after advancing 0.3 per cent in January.
Healthcare costs slipped 0.1 per cent in February, with prices for hospital care falling 0.5 per cent and the cost of prescription medication declining 0.4 per cent. The cost of doctor visits, however, rose 0.2 per cent.
Apparel prices continued to march higher, rising 1.5 per cent in February after surging 1.7 per cent in January. The cost of motor vehicle insurance rose by a record 1.7 per cent last month.
Prices of new motor vehicles fell 0.5 per cent, the biggest drop since August 2009, after slipping 0.1 per cent in January.
Used car and trucks prices dropped after four straight monthly increases and the cost of airline fares rebounded after falling in February.