Federal Reserve officials were looking at potentially cutting interest rates soon if consumer prices started coming down.
For now, that doesn’t seem to be the case.
Consumer prices in the United States picked up last month, rising 0.4% from January to February, higher than the previous month’s figure of 0.3%, according to statistics released Tuesday by the Labor Department. Consumer prices rose 3.2% last month over a year earlier.
Excluding volatile food and energy prices, so-called “core” prices also climbed 0.4% from January to February, the Associated Press reported. That matches the previous month’s rise and a faster pace than is consistent with the Fed’s 2% inflation target.
“It’s a disappointment, but not a disaster,” Eric Winograd, U.S. economist at asset manager AB, told the AP. “The underlying details are more encouraging than the top-line number, which was boosted by a few volatile categories — the type of prices that tend not to repeat month-to-month.”
Those categories include gas prices, which jumped 3.8% just from January to February but are still below their level of a year ago. Air fares were up 3.6%, an clothing prices rose 0.6% after three months of declines but are unchanged compared with a year earlier, according to the AP report.
Despite February’s elevated figures, most economists expect inflation to continue slowly declining this year. At the same time, the uptick last month may underscore the Fed’s cautious approach toward interest rate cuts.
In his State of the Union speech last week, Biden talked about the things his administration has done to reduce costs. The president also criticized many large companies for engaging in “price gouging” and so-called “shrinkflation,” in which a company shrinks the amount of product inside a package rather than raising the price.
“Too many corporations raise prices to pad their profits, charging more and more for less and less,” Biden said.
Overall inflation has sunk from a peak of 9.1% in June 2022, though it’s now easing more slowly than it did last spring and summer. Fed Chair Jerome Powell signaled in congressional testimony last week that the central bank is getting closer to cutting rates.
After meeting in January, Fed officials said in a statement that they needed “greater confidence” that inflation was steadily falling to their 2% target level. Since then, several of the Fed’s policymakers have said they believe prices will keep declining. One reason, they suggested, is that consumers are increasingly pushing back against higher prices by seeking out cheaper alternatives.
