United States consumer prices rose in line with expectations in February, offering a final snapshot of inflation trends before a sharp rise in oil prices tied to the escalating conflict with Iran threatens to cloud the outlook for the months ahead.
The consumer price index (CPI) increased 0.3% on a seasonally adjusted basis in February, following a 0.2% gain in January, according to data released by the U.S. Bureau of Labor Statistics.
Over the past 12 months, the headline CPI rose 2.4%, matching market forecasts.
Core inflation, which excludes the more volatile food and energy categories, also came in as expected, rising 0.2% on the month and increasing 2.5% from a year earlier.
The annual readings were unchanged from January, suggesting that inflation remains above the U.S. Federal Reserve’s 2% target but is not accelerating.
Shelter costs, the largest component in the CPI basket, rose 0.2% in February, bringing the annual increase to 3%.
Within the category, rents climbed just 0.1% during the month, marking the smallest monthly increase since January 2021.
Elsewhere, apparel prices increased sharply, rising 1.3% in February, marking the largest monthly jump since September 2018 and highlighting the category’s sensitivity to tariff-related pressures.
Prices for new vehicles remained steady on the month and were up only 0.5% from a year earlier.
Energy prices increased 0.6% in February and were 0.5% higher than a year earlier.
Food costs accelerated during the month, rising 0.4% in February and 3.1% over the past year.
Egg prices, however, continued to decline, falling 3.8% in February and extending their annual drop to 42.1%.
The inflation data largely reflects price conditions before the latest spike in crude oil, meaning the effects of higher energy costs are unlikely to appear in official inflation readings until the coming months.
The outlook changed significantly after the United States and Israel launched attacks on Iran, triggering fears of supply disruptions across the Middle East and sending crude prices sharply higher.
Oil briefly surged above $100 per barrel earlier in the week before easing back, though prices remained elevated.
Higher oil prices often feed through to broader inflation measures by increasing transportation, shipping and production costs.
This can lead to higher prices for gasoline as well as a wide range of consumer goods.
If energy costs remain elevated, headline inflation readings could rise in the coming months even if underlying price pressures remain relatively stable.
For policymakers at the Federal Reserve, the February CPI report is likely to reinforce expectations that interest rates will remain unchanged in the near term while officials assess the impact of geopolitical developments and past monetary policy decisions.
The central bank cut interest rates several times last year, and policymakers are continuing to monitor how those reductions filter through the broader economy.
Market participants broadly expect the Federal Reserve to leave rates unchanged at its next policy meeting scheduled for 18 March.
According to the CME Group FedWatch Tool, traders see the first rate reduction potentially arriving in September, with roughly a 43% probability that a second cut could follow before the end of the year.
