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CPI rises in February, driven by energy prices
On a seasonally-adjusted basis, overall consumer prices rose 0.4 percent in February, with the Bureau of Labor Statistics reporting the overall consumer price index (CPI) grew 1.7 percent over the 12-month period. In a new Macro Data Flash report, NAFCU Chief Economist and Vice President of Research Curt Long noted that most of the inflation was concentrated in energy prices.
"Energy prices have now accelerated for four consecutive months, and analysts expect prices at the pump to continue to rise due to growing demand and restricted OPEC production," said Long. "Although home prices are soaring, shelter inflation has been muted since it is based on rental prices."
Energy prices rose 3.9 percent during the month, following a 3.5 percent increase in January. From a year ago, energy prices were up 2.3 percent. Additionally, food prices climbed 0.2 percent in February and are up 3.6 percent compared to this time last year.
"While many are concerned that the end of the pandemic combined with a surge in government spending could result in soaring prices, those pressures have yet to emerge," Long added. "Should they manifest, the Fed is inclined to view any rise in inflation as transitory, so long as inflation expectations remain stable.
"Markets are beginning to price in a rate hike in early 2022, but while that may be a realistic time for the Fed to begin tapering asset purchases, a rate change by that date is highly unlikely," concluded Long.
Core prices (excluding food and energy costs) rose 0.1 percent compared to January. Year-over-year core CPI growth was 1.3 percent.