Inflation eases in February, remains elevated

The rate at which U.S. consumer prices rose eased slightly in February, to 0.4% from the month before. That was down from a 0.5% increase from December to January.

Monthly increases in the price of shelter and clothing made up most of the price hikes in February’s report, with both rising 0.8% from January. Food prices also increased by 0.4% from January to February, while oil and natural gas prices fell by 7.9% and 8%, respectively, over the same time period.

On an annual basis, prices rose 6%, which was down from January's 6.4% increase over a 12-month period. Core inflation, which excludes volatile food and energy costs, rose 5.5% annually in February, down from the 5.6% in January.

Transportation expenses remained elevated by 14.6% on an annual basis. The price of used vehicles fell by 13.6% over the same period of time.

This persistently high inflation is well above the Federal Reserve’s target annual growth rate of 2%, leading analysts to question how the central bank will react at its rate setting meeting next week.

After the financial fallout from two bank failures the past few days, economists at Goldman Sachs have predicted that the Fed may not raise its target benchmark interest rate, or that it may consider a increasing the rate by a quarter of a percentage point, smaller than previously forecast.

Just days before the failure of Silicon Valley Bank, Fed Chair Jerome Powell spoke before the U.S. Senate Banking Committee and indicated that the central bank would be willing to raise rates by another half of a percentage point, if necessary.

“The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Powell said last week. “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”