Inflation goes up again in February

WASHINGTON>> Consumer prices in the United States picked up last month, a sign that inflation remains a persistent challenge for the Federal Reserve and for President Joe Biden’s re-election campaign, both of which are counting on a steady easing of price pressures this year.

Prices rose 0.4% from January to February, higher than the previous month’s figure of 0.3%, the Labor Department said Tuesday. Compared with a year earlier, consumer prices rose 3.2% last month, above January’s 3.1% annual pace.

Excluding volatile food and energy prices, so-called “core” prices also climbed 0.4% from January to February, matching the previous month’s rise and a faster pace than is consistent with the Fed’s 2% inflation target. Core inflation is watched especially closely because it typically provides a better read of where inflation is likely headed.

“It’s a disappointment, but not a disaster,” said Eric Winograd, U.S. economist at asset manager AB. “The underlying details are more encouraging than the topline number, which was boosted by a few volatile categories — the type of prices that tend not to repeat month-to-month.”

Those volatile items include gas prices, which jumped 3.8% just from January to February but are still below their level of a year ago. Air fares surged 3.6% after two months of much smaller increases.

Housing and rental costs, though, which tend to change more gradually, cooled in February: They rose 0.4% from January, slower than the 0.6% increase the previous month. Measures of new apartment leases, which have cooled, are expected to feed into the government’s inflation data in the coming months.

New car prices ticked down 0.1% in February. Though these prices remain much higher than they were before the pandemic, they’re expected to decline further. Grocery prices were unchanged last month and are up just 1% from a year earlier.

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.

Overall inflation has plummeted from a peak of 9.1% in June 2022, though it’s now easing more slowly than it did last spring and summer. The prices of some goods, from appliances to furniture to used cars, are actually falling after clogged supply chains during the pandemic had sent prices soaring higher. There are more new cars on dealer lots and electronics on store shelves.

By contrast, prices for dental care, car repairs, and other services are still rising faster than they did before the pandemic. Car insurance has shot higher, reflecting rising costs for repairs and replacement. And after having sharply raised pay for nurses and other in-demand staff, hospitals are passing their higher wage costs on to patients.

One factor that could keep inflation elevated is the stillhealthy economy. Though most economists had expected a recession to occur last year, hiring and growth were strong and remain healthy. The economy expanded 2.5% last year and could grow at about the same pace in the first three months of this year, according to the Federal Reserve’s Atlanta branch.