Inflation in the United States fell last month for the first time since September, as consumer prices showed modest growth, with the higher cost of housing partially offset by a decrease in airfare prices.
These developments give the Federal Reserve room to keep interest rates unchanged next week while closely monitoring the potential impact of the trade war on the economy.
The Consumer Price Index (CPI) rose 2.8% in February compared to a year ago, but it was lower than the 3% increase in January, according to a report released Wednesday by the Department of Labor.
Core prices, which exclude volatile categories like food and energy, increased by 3.1% compared to a year ago, while January had a rise of 3.3%. The core inflation figure is the lowest since April 2021.
The decline was bigger than economists had expected, according to a survey by the firm “FactSet.” However, inflation remains above the 2% target set by the Federal Reserve. Most economists expect inflation to remain high this year as U.S. tariffs go into effect.
The report “is encouraging news, though it doesn’t tell us much about which direction inflation is heading,” said economist Oren Klachkin of “Nationwide Financial Markets” via email. “While tariffs could lead to rising goods prices, we see an increased risk of inflationary growth.”
According to the report, monthly inflation was lower than expected. Consumer prices rose by 0.2% in February, a smaller increase than the 0.5% recorded in January. Core prices increased by 0.2%, compared to 0.4% in January.
Economists closely monitor core prices because they are usually a better indicator of inflation. A sharp 4% decline in air travel costs in February, compared to January, helped lower overall inflation.
The increase in rent prices also showed signs of slowing down, while hotel room and car insurance costs rose much more slowly in February than in January. The price of new cars dropped last month compared to January.
Food prices remained unchanged from January, providing relief for consumers who have been facing a 25% increase in prices over the past four years.
