Published: Thu, March 15, 2018
Money | By Ethel Goodwin

USA inflation in line with expectations in February

USA inflation in line with expectations in February

The three-month annualized change rose to 3.1% in February.

This latest performance was well short of analysts' expectations of a 0.3% increase for February. The year-on-year increase in the so-called core CPI was unchanged at 1.8 percent in February.

Central bankers were baffled for much of past year by the weakness of price pressures in the face of the continuing recovery. The Conference Board consumer confidence index tracking employment expectations attests to this. The NRF is forecasting 2018 retail sales to grow between 3.8% and 4.4% compared to 2017. Data from January 1, 2012, to February 28, 2018. Producer prices, which show inflation before it reaches consumers, have risen 2.8 percent over the past year.

The producer-price index, a measure of the prices businesses charge for their goods and services, increased 0.2% in February from a month earlier, the Labor Department said Wednesday. The rate is the same when volatile food and energy prices are excluded.

U.S. consumer prices continued to firm in February, indicating inflation is creeping up toward the Federal Reserve's target without the kind of breakout that would warrant a faster pace of interest-rate hikes.

TD Economics pointed out this report does not does not include the inflationary impact of steel and aluminum tariffs that are set to come into force in the coming days.

The inflation-adjusted hourly rate of pay reported growth of 0.4% yoy against a 0.7% rise in January. Core prices were up 1.8% on the year. The highlighted 2 percent level is the Federal Reserve's Core inflation target for the CPI's cousin index, the BEA's Personal Consumption Expenditures (PCE) price index.

The Fed has forecast three rate hikes this year. "But, there is certainly an upside risk to this view, with so many upward forces at play", Preston said. The food index was unchanged in February, as a decline in the index for food at home offset an increase in the food away from home index. At 2.5%, this is the seventh consecutive reading above 2%. We expect this trend to be sustained in February, particularly as a result of further depletion to the stock of food commodities from the previous harvest season. "However, the lack of momentum in the core [rate] will also heighten the argument among the more dovish members that the Fed should remain cautious with no sense of immediacy to hike rates", she said. Many economists expect that at some point it will raise its projection to four rate increases this year amid optimism that the robust labor market will start boosting wage growth at least by the second half of the year.

"This inflation report likely does little to shift the narrative heading into the March FOMC meeting", said Ben Ayers, senior economist at Nationwide.

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