Inflation in the United States eased slightly in February, though price growth remains above the Federal Reserve’s 2% target, according to data released Wednesday by the Labor Department. The latest figures come just ahead of the Federal Reserve’s policy meeting next week, where interest rate decisions will be closely watched.
The consumer price index (CPI), which measures the cost of essential goods such as food, fuel, and housing, rose 0.2% in February compared to the previous month and 2.8% on an annual basis. Both figures were lower than expected, suggesting a modest slowdown in inflationary pressures.
Core inflation, which excludes volatile food and energy prices, increased 0.2% month-over-month and 3.1% year-over-year—also slightly below economists’ forecasts.
Despite the decline, inflation remains a burden for American households, particularly for lower-income families, who spend a greater portion of their income on essentials.
- Food prices rose 0.2% in February. While grocery prices remained flat overall, egg prices surged by 10.4%, and meat, poultry, and fish prices increased by 0.5%. Meanwhile, fruits, vegetables, and dairy prices declined.
- Energy prices climbed 0.2%, a slowdown from January’s 1.1% increase. Gasoline prices fell by 1%, while natural gas rose by 2.5%.
- Housing costs, a key inflation driver, increased 0.3% for the month and 4.2% year-over-year, marking the smallest annual gain since December 2021.
- Transportation costs fell 0.8%, with airfare dropping 4%, offsetting small increases in vehicle maintenance and auto insurance.
The data arrives just before the Federal Reserve’s monetary policy meeting on March 18-19. Markets widely expect the Fed to maintain interest rates at 4.25%-4.5% for the second consecutive meeting, as officials continue evaluating inflation trends and labor market conditions.
While some see February’s inflation numbers as a positive sign, Morgan Stanley’s Ellen Zentner cautioned against expecting immediate rate cuts:
“Today’s cooler-than-expected CPI reading was a breath of fresh air, but no one should expect the Fed to start cutting rates immediately.”
Markets currently see a 99% chance of the Fed holding rates steady next week, according to the CME FedWatch tool—an increase from 96% a day ago and 94% a week ago.
With continued uncertainty over trade and immigration policy impacts, the Fed is likely to wait for sustained signs of inflation easing before adjusting rates.
