After accelerating at the beginning of 2023, consumer inflation continued rising in February according to the latest read of the Consumer Price Index (CPI) released on Tuesday as the cost of shelter, food, and gasoline continued to increase.
According to the Bureau of Labor Statistics, headline CPI increased 0.4 percent month-over-month and is up 6.0 percent year-over-year, meeting Wall Street estimates for consumer inflation in February.
CPI for all items rises 0.4% in February as shelter increases #CPI #BLSdata https://t.co/dJyJeKlXDJ
— BLS-Labor Statistics (@BLS_gov) March 14, 2023
But the core CPI number — which excludes volatile food and energy — came in at 0.5 percent month-over-month, hotter than expected but meeting the estimated 5.5 percent year-over-year increase. Notably, the core CPI number showed an accelerating monthly increase as prices continue to move in the wrong direction after doing an about-face and spiking in January.
The latest CPI increase was driven primarily by the cost for shelter, "accounting for over 70 percent of the increase" in February, according to the government's data. In the last 12 months, energy costs have surged 13.3 percent, transportation jumped 14.6 percent, and the food index is up 9.5 percent.
At a more granular level, the largest price increases for food items since February 2022 include eggs (55.4 percent), margarine (39.8 percent), food at elementary and secondary schools (299.7 percent), pet food (15.2 percent), airline fares (26.5 percent), sauces and gravies (15.5 percent), frozen vegetables (21.4 percent), cookies (16.6 percent), and ice cream (13.9 percent).
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Comparing February’s monthly 0.4 percent CPI with the 0.2 percent wage growth seen in the February jobs report, Americans’ real wages are still lagging behind inflation by -.02 percent month-over-month and -1.4 percent over the previous 12 months.
When the Federal Open Market Committee (FOMC) meets next week to make the Fed's next decision on interest rates, this week's CPI report, last week's jobs report, and the biggest bank failures since the 2008 crisis will all have to be factored in.
Clearly, inflation is not yet moving down in a meaningful way — demonstrated by the hotter-than-expected core CPI monthly advance — suggesting Powell will need to follow through on more interest rate hikes as he explained to Congress earlier this month. But the failure of Silicon Valley Bank and Signature Bank in recent days raised the specter of financial institutions — propped up by the Fed — that can't manage in the high-interest environment created by the Fed to address inflation.
US CPI for February YoY:
— Klips (@OfficialKlips) March 14, 2023
Expected: 6.0%
Actual: 6.0%
Inflation is stubborn and does not want to go down so quickly.
Will this prevent Powell from stopping interest rate hikes at next week's FOMC meeting following the unfolding banking crisis? Is the Fed in a trap?#FOMC… https://t.co/8XtwXmB3wx
The Fed already, apparently prematurely, backed off its consecutive .75 basis point interest rate hikes toward the end of 2022 to .25 bps increases, and inflation has continued to hit Americans' wallets. Now, after Powell suggested to Congress that the number and pace of interest rate hikes would accelerate in 2023, will the Fed follow through? Or did the failure of SVB and Signature Bank shake the Fed enough to make them change their minds...again? It would seem irrational for the Fed to decide to pause interest rate changes at next week's meeting rather than tack on another increase — expected to be .25 bps — but hey, it's the Fed.
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