February inflation surprises with modest uptick, but core pressures ease

Inflation remains sticky on a headline basis, but core price pressures are slowing toward the Fed's 2% target.

Mar 12, 2024 - 18:30

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February inflation surprises with modest uptick, but core pressures ease

U.S. inflation pressures quickened modestly last month, but core price pressures continued to ease, suggesting the broader trajectory is moving slowly toward the Federal Reserve's 2% target over the coming months.

The headline consumer price index for February was pegged by the Commerce Department at 3.2%, rising from the prior month's tally of 3.1% and coming in ahead of Wall Street's 3.1% consensus forecast.

On a monthly basis, inflation edged 0.4% higher, faster than the 0.3% gain in January but matching Wall Street's 0.4% forecast.

So-called core inflation, which strips out volatile components like food and energy, eased to 3.8%, the lowest in more two years but higher than Wall Street's 3.7% forecast. The monthly reading of 0.4% also topped Wall Street forecasts and matched the January reading.

The Fed tracks core inflation pressures as part of its price-stability mandate, and the year-on-year gains remain nearly double its preferred target of 2%.

US February CPI: 0.4% m/m in topline & core. 3.2% & 3.8% Y/Y. Housing, shelter & OER all up 0.4%. So, that January move was likely seasonal noise rather than signal of a new trend. Services up 0.5% following the 0.7% in January. Again, not seeing a new trend. It’s sticky and… pic.twitter.com/gEpC1AO74e— Joseph Brusuelas (@joebrusuelas) March 12, 2024

U.S. stocks were little changed following the data release, with futures tied to the S&P 500 indicating an opening bell gain of 18 points while those tied to the Dow suggest a 38-point advance. The Nasdaq is called 80 points higher

Benchmark 10-year Treasury note yields rose 1 basis point (0.01 percentage point) following the data release to change hands at 4.104% while 2-year notes were pegged at 4.542%, around 1 basis point lower from prior to the data release.

More Economy:

Last week, the Labor Department said 275,000 new jobs were created last month. The larger-than-expected overall tally spooked investors concerned about the impact of rising wages on inflation.

However, the February jobs report also noted that average hourly earnings growth eased by a slower-than-expected 0.1%, the smallest increase since last autumn. The year-on-year gain slowed to 4.3% from 4.6%, a figure that also fell inside Wall Street forecasts and should soothe concern about spiraling wage gains.

Meanwhile, the the labor-force-participation rate both held at 62.5% while the headline unemployment rate edged higher to 3.9%.

CME Group's FedWatch has long discounted the chances of a Fed rate move next week in Washington. It now pegs the chances of a quarter-percentage-point cut in June at around 60%.