WASHINGTON (AP) – Consumer prices likely rose last month at a pace that would exceed the Federal Reserve’s (Fed’s) inflation target, underscoring why the Fed is being cautious as it considers when to cut interest rates and suggesting that inflation will remain a potent issue in this year’s presidential election.
Yet yesterday’s report from the Labour Department may also show that underlying price pressures continue to ease, which would be an encouraging sign that inflation is gradually coming under control.
Economists have estimated that prices rose at a brisk 0.4 per cent annual pace from January to February, up from a 0.3 per cent rise the previous month, according to estimates compiled by FactSet. Compared with a year earlier, inflation is expected to have remained 3.1 per cent in February, unchanged from January. Higher gas costs likely drove much of last month’s overall inflation.
The average national pump price climbed from USD2.94 a gallon in mid-January to USD3.08 in mid-February, according to the Energy Department. Grocery prices are thought to have ticked up, too. And because of higher food and labour costs, restaurant prices are expected to have risen more than they did before the pandemic.
Excluding volatile food and energy costs, economists think “core” prices increased 0.3 per cent from January to February, down from a hot 0.4 per cent in the previous month.
Compared with 12 months earlier, core prices are projected to have risen 3.7 per cent in February, according to FactSet, down from 3.9 per cent in January, and the smallest rise in nearly three years.
Core inflation is watched especially closely because it typically provides a better read of where inflation is likely headed.
Overall inflation has plummeted from a peak of 9.1 per cent in June 2022, though it’s now easing more slowly than it did last spring and summer.
The prices of many 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.
