US consumer inflation unchanged but price shocks from Iran war loom
US inflation held steady at 2.4 per cent in February, with the White House expecting war-related price shocks to be “temporary”.
Plastic letters arranged to read "Inflation" are placed on US Dollar banknote in this illustration taken, Jun 12, 2022. (Photo: REUTERS/Dado Ruvic)
WASHINGTON: Consumer inflation in the United States remained stable at 2.4 per cent in February (Mar 11), official data showed Wednesday (Mar 11), with price shocks from the US-Israel war on Iran yet to be reflected in the data.
US President Donald Trump has made lowering prices a key part of his agenda, with the world's largest economy still battling years of higher-than-usual inflation after the Covid pandemic.
The consumer price index (CPI) rose 2.4 per cent year-on-year, the same increase as reported a month prior. The index rose 0.3 per cent month-on-month, with both figures in line with market expectations.
Energy prices jumped 0.6 per cent between January and February, following a 1.5-per cent fall the previous month.
The White House was quick to laud the new data, saying it expected price shocks from the war to be "temporary."
"The American economy is strong and once we are past temporary disruptions from Operation Epic Fury, we will see even greater economic progress," said White House spokesperson Kush Desai.
But spiking global oil prices from the US-Israel war on Iran were not reflected in Wednesday's data, as the strikes began on the last day of the month.
US President Donald Trump has made lowering prices a key part of his agenda, with the world's largest economy still battling years of higher-than-usual inflation after the Covid pandemic.
The consumer price index (CPI) rose 2.4 per cent year-on-year, the same increase as reported a month prior. The index rose 0.3 per cent month-on-month, with both figures in line with market expectations.
Energy prices jumped 0.6 per cent between January and February, following a 1.5-per cent fall the previous month.
The White House was quick to laud the new data, saying it expected price shocks from the war to be "temporary."
"The American economy is strong and once we are past temporary disruptions from Operation Epic Fury, we will see even greater economic progress," said White House spokesperson Kush Desai.
But spiking global oil prices from the US-Israel war on Iran were not reflected in Wednesday's data, as the strikes began on the last day of the month.
Markets will be buoyed by the steadiness in February's figure, but investors are likely to treat it as more of a baseline to compare expected future price increases against.
"February CPI readings as expected were subdued but given the disruption to energy supplies from the Iranian conflict the focus is on the extent and duration of the boost to inflation in the coming months," said Kathy Bostjancic, chief economist at Nationwide.
She said that Nationwide expected inflation to rise to more than four per cent (year-on-year) "in the coming few months, before easing back in the following months".
Wednesday's data released by the Labour Department showed price increases in medical care, education, apparel, airline fares and household furnishings.
Prices for used vehicles and vehicle insurance, communications and personal care were down.
Core CPI, which excludes volatile energy and food prices, rose 2.5 per cent over last year in February.
"February CPI readings as expected were subdued but given the disruption to energy supplies from the Iranian conflict the focus is on the extent and duration of the boost to inflation in the coming months," said Kathy Bostjancic, chief economist at Nationwide.
She said that Nationwide expected inflation to rise to more than four per cent (year-on-year) "in the coming few months, before easing back in the following months".
Wednesday's data released by the Labour Department showed price increases in medical care, education, apparel, airline fares and household furnishings.
Prices for used vehicles and vehicle insurance, communications and personal care were down.
Core CPI, which excludes volatile energy and food prices, rose 2.5 per cent over last year in February.
BATTERED HOUSEHOLDS
February's year-on-year inflation figure was near its lowest levels over the past 12 months, but consumers in the United States continue to grapple with prices that have remained stubbornly high post-pandemic.
US inflation hit a high of 9.1 per cent in June 2022, and while it has dropped from those levels, years of elevated prices have battered households across the country.
The Federal Reserve, which has a dual mandate to address inflation and unemployment, raised interest rates to control flaring prices and while it is now in a rate-cutting phase, they remain at elevated levels.
The new CPI figure will be a factor in the Fed's discussion at a meeting to set rates next week. The Fed's preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, will be released later this week.
The central bank has a long-term goal of 2 per cent for US inflation, but is also battling weakness in the labor market.
The United States unexpectedly lost jobs in February while unemployment edged up, government data showed last week, piling pressure on Trump's economic agenda as crucial midterm elections approach.
Affordability has been a key issue, and the weaker job numbers have turned up the heat on criticism of Trump's economic policies.
US inflation hit a high of 9.1 per cent in June 2022, and while it has dropped from those levels, years of elevated prices have battered households across the country.
The Federal Reserve, which has a dual mandate to address inflation and unemployment, raised interest rates to control flaring prices and while it is now in a rate-cutting phase, they remain at elevated levels.
The new CPI figure will be a factor in the Fed's discussion at a meeting to set rates next week. The Fed's preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, will be released later this week.
The central bank has a long-term goal of 2 per cent for US inflation, but is also battling weakness in the labor market.
The United States unexpectedly lost jobs in February while unemployment edged up, government data showed last week, piling pressure on Trump's economic agenda as crucial midterm elections approach.
Affordability has been a key issue, and the weaker job numbers have turned up the heat on criticism of Trump's economic policies.
The US-Israel war on Iran has roiled global oil markets, with traffic through the key Strait of Hormuz almost at a standstill and strikes hitting oil facilities across the region.
That pressure is showing at US pumps, with the national average price for a gallon of gasoline on Wednesday up by 22 per cent compared to last month, according to motor club AAA.
Still, some analysts looked at February's CPI figure as encouraging in the long term, saying it firmed the view that headline inflation was trending downwards, outside of geopolitical shocks.
"This pre-war inflation reading isn't entirely stale, as it shows that key pillars of disinflation are in place," said Bernard Yaros, lead US economist at Oxford Economics.
Others warned that the unchanged figure was masking continuing upward pressures on prices.
"These are far from normal times, and the data must be interpreted through the lens of distortions from the government shutdown, unprecedented trade policy volatility, and record swings in energy prices tied to the conflict in the Middle East," said Gregory Daco, chief economist at EY-Parthenon.
Daco said those factors meant that inflation was likely closer to 2.8 per cent currently, with further increases possible in the coming months.
That pressure is showing at US pumps, with the national average price for a gallon of gasoline on Wednesday up by 22 per cent compared to last month, according to motor club AAA.
Still, some analysts looked at February's CPI figure as encouraging in the long term, saying it firmed the view that headline inflation was trending downwards, outside of geopolitical shocks.
"This pre-war inflation reading isn't entirely stale, as it shows that key pillars of disinflation are in place," said Bernard Yaros, lead US economist at Oxford Economics.
Others warned that the unchanged figure was masking continuing upward pressures on prices.
"These are far from normal times, and the data must be interpreted through the lens of distortions from the government shutdown, unprecedented trade policy volatility, and record swings in energy prices tied to the conflict in the Middle East," said Gregory Daco, chief economist at EY-Parthenon.
Daco said those factors meant that inflation was likely closer to 2.8 per cent currently, with further increases possible in the coming months.
Source: AFP/fs
