U.S. consumer prices rose 0.2% in February
Broader trend suggests inflationary pressures remain tame
U.S. consumer prices rose in February as energy and food prices picked up, although the broader trend suggested inflationary pressures remain tame.
The consumer-price index, which measures what Americans pay for everything from lipstick to used trucks, rose a seasonally adjusted 0.2% in February, the Labor Department said Tuesday, snapping three consecutive months of flat readings.
Excluding the volatile food and energy categories, so-called core prices rose 0.1%, compared with a 0.2% rise in January.
Economists surveyed by The Wall Street Journal expected consumer prices rose 0.2% in February, and core prices to rise 0.2% as well.
In the12 months through February, overall prices rose 1.5%, the smallest year-over-year increase since September 2016. Core prices were up 2.1% on the year, a pace last matched in October.
Economists expected a 1.6% increase in overall prices from a year earlier, and a 2.2% rise in core prices over the 12-month period.
Muted inflation readings have convinced Fed officials that there’s little urgency to raise interest rates right now.
Tuesday’s report comes days after the February employment report, which showed unsettling signs of a sharp hiring slowdown despite rising wages.
Tuesday’s report also showed wage pressures picked up as U.S. unemployment remained low, pushing up the cost of labor. After adjusting for inflation, average hourly earnings rose a seasonally adjusted 0.3% in February and are up 1.9% from February 2018.
However the average workweek declined in February, given a 0.3% drop in average week- ly hours. That meant the average weekly paycheck, adjusted for inflation, declined 0.1% from January even though hourly wages rose. A decline in gasoline prices that began in October ended last month. Gas prices for U.S. drivers were $2.31 a gallon on average in February, up from $2.25 in January, according to the U.S. Energy Information Administration.
Tuesday’s report showed an index of energy prices rose 0.4% in February, led by a seasonally adjusted 1.5% rise in gasoline costs.
The price index for food rose 0.4%. Used vehicles prices, which have been volatile in recent months, fell 0.7%.
A stronger dollar is likely keeping a lid on the prices of goods, many of which are either purchased overseas or compete with imports. Higher interest rates and faster economic growth in the U.S. compared with other developed economies have helped push the dollar higher.
The WSJ Dollar Index, which measures the greenback against a basket of other currencies, gained roughly 8% over the past year. The mix of muted price pressures and steady wage gains appears to leave consumers in good shape. Still, the latest inflation reading is likely to further bolster Federal Reserve officials’ decision to stop raising interest rates.
“With nothing in the outlook demanding an immediate policy response and particularly given muted inflation pressures, the [Federal Open Market] Committee has adopted a patient, wait-and-see approach to considering any alteration in the stance of policy,” Fed Chairman Jerome Powell said during a speech in Stanford, Calif., last week.
“Inflation will probably run a bit below our objective for a time due to declines in energy prices, but those effects are likely to prove transitory,” he said.
The central bank signaled in January that it was moving to the sidelines after raising its short-term benchmark rate four times last year, most recently in December to a range between 2.25% and 2.50%.
Inflation as measured by the Fed’s preferred gauge, the personal-consumption-expenditures index, has been muted in recent months.
The Commerce Department’s price index for personal-consumption expenditures rose 0.1% on the month in December and was up 1.7% from a year earlier-shy of the Fed’s 2% yearover-year target.
The public’s inflation expectations fell in February, according to the Federal Reserve Bank of New York’s latest Survey of Consumer Expectations.
Inflation expectations held by the public one year and three years from now fell, both to readings of 2.8% from 3% in January, the bank said Monday.
Still, there are signs some inflationary pressures are stirring.
The consumer-price index follows the Labor Department’s latest employment report, which showed average hourly earnings for private-sector workers rose 3.4% in February from a year earlier, a pace last matched in April 2009.