CPI Report Shows Annual Price Increase Slowing Down in February

The U.S. Consumer Price Index (CPI) report released Tuesday morning showed that annual price increases continued to slow in February, according to the Bureau of Labor Statistics.[0] The CPI, a closely watched gauge of inflation, rose 6.0% year-over-year in February, less than January’s year-over-year change of 6.4%.[1] On a month-over-month basis, the overall CPI rose 0.4%.

The Core CPI (excluding volatile food and energy costs) increased by 0.5% from January and 5.5% year-over-year from the same month in 2021.[2] The Bureau of Labor Statistics reported that shelter prices were the primary cause of the monthly increase in February, comprising 70% of the total growth.[3] The prices for shelter increased by 0.8% in the last month, and by 8.1% in comparison[4]

Many economists have explained the high inflation numbers by suggesting that this is just a data collection problem.[5] The cost of shelter rose 8.1%, one of the largest increases since the early 1980s, which constituted 60% of the total increase in the cost of all items except food and energy.[5] However, the government’s shelter data may not be capturing what’s actually happening in the housing market, as rent prices are already falling and the housing market appears to be softening.[5]

The elevated inflation rate is creating a challenge for the Federal Reserve, as they must balance the need to bring down inflation with the instability in the banking sector.[6] The Fed had hinted that they were on target for a meaningful rate increase, but the recent disruption in the banking sector has called that into question.[7] Futures on interest rates are predicting a 0.25 percentage point hike as the most likely outcome, though there is still a chance the Federal Reserve might keep rates unchanged.[8] Expectations of a 0.5 percentage point increase which had been held last week have now decreased.[8]

Janet Yellen, the Treasury Secretary, pointed to increasing interest rates as the cause of SVB’s closure.[9] Goldman Sachs no longer expects the Fed to raise interest rates at its next two-day meeting on March 21 and 22 and Investment bank Nomura is calling for no increase next week.[10] Goldman Sachs posits that the Federal Reserve may still raise rates by 25 basis points in the months of May, June, and July.[9]

Inflation remains elevated but is slowly coming down, according to the latest Consumer Price Index.[11]

0. “Inflation Is Slowing Down. It’s a Positive for the Fed.” Barron’s, 14 Mar. 2023, https://www.barrons.com/articles/february-cpi-inflation-data-report-today-ea428646

1. “Inflation rose 6% in February as Fed mulls more rate hikes amid bank chaos” New York Post , 14 Mar. 2023, https://nypost.com/2023/03/14/inflation-rose-6-in-february-as-fed-mulls-more-rate-hikes

2. “US CPI rose 6.0% in February, per the Bureau of Labor Statistics” Business Insider, 14 Mar. 2023, https://www.businessinsider.com/inflation-price-growth-us-cpi-february-2023-3

3. “Aside From Lagged Rent Estimates, CPI Inflation Averaged 1.1 Percent for Eight Months” Cato Institute, 14 Mar. 2023, https://www.cato.org/blog/aside-lagged-rent-estimates-cpi-inflation-averaged-11-eight-months-2

4. “Inflation fell for the eighth straight month in February” The Mercury News, 14 Mar. 2023, https://www.mercurynews.com/2023/03/14/inflation-fell-for-the-eighth-straight-month-in-february/

5. “As Inflation Rises, Consumers Shrug at Price Increases | Time” TIME, 14 Mar. 2023, https://time.com/6262763/inflation-high-prices-consumers-cpi

6. “Inflation cooled in February, yet remains stubbornly high” CBS News, 14 Mar. 2023, https://www.cbsnews.com/news/inflation-cpi-report-february-2023-03-14

7. “Inflation Fell To 6% In February—But Some Experts Fear Banking Crisis Could Make Prices Worse” Forbes, 14 Mar. 2023, https://www.forbes.com/sites/jonathanponciano/2023/03/14/inflation-fell-to-6-in-february-but-some-experts-fear-banking-crisis-could-make-prices-worse

8. “February’s CPI Inflation Numbers Put Focus On Home Prices” Forbes, 14 Mar. 2023, https://www.forbes.com/sites/simonmoore/2023/03/14/februarys-cpi-inflation-numbers-put-focus-on-home-prices/

9. “Inflation cools but interest rate and recession fears remain” Fox Business, 14 Mar. 2023, https://www.foxbusiness.com/personal-finance/inflation-cpi-increases-february-2023

10. “What Inflation Data Means for the Economy After SBV Collapse” Newsweek, 14 Mar. 2023, https://www.newsweek.com/inflation-sbv-data-economy-collapse-finance-1787619

11. “Breaking News: Headline US Inflation Drops to 6%, US Dollar Undecided” DailyFX, 14 Mar. 2023, https://www.dailyfx.com/news/breaking-news-headline-us-inflation-drops-to-6-us-dollar-undecided-20230314.html