EconoFACTS

March 12, 2024 | 09:49

U.S. Consumer Price Inflation Fails to Submit

Economist

Chief U.S. Economist and Managing Director
Economics

Scott Anderson is BMO’s Chief U.S. Economist and Managing Director. He analyzes and forecasts U.S. national and ... (Read more)

Scott Anderson , Ph.D.

Chief U.S. Economist and Managing Director
Economics

Scott Anderson is BMO’s Chief U.S. Economist and Managing Director. He analyzes and forecasts U.S. national and ... (Read more)

U.S. CPI inflation, as expected, came in “hot” once again in February, led by rising gasoline and shelter prices. Headline inflation increased 0.4% in the month, in-line with our forecast and the consensus, but remains an unwelcome acceleration from an unrevised and already elevated 0.3% January reading. The BLS noted that 60% of the increase in inflation last month came from just two components: gasoline (+3.6%) and shelter (+0.4%). Unfortunately, the details of the report looked just as ugly as the headline. We saw strong monthly price increases in nearly all the usual categories like services (+0.5%), owners’ equivalent rent (+0.4%), airfares (+3.6%), and motor vehicle insurance (+0.9%), but also in a number of categories that in recent months had been helping to cool inflation, like energy (+2.3%), commodities prices (+0.4%) and apparel (+0.6%). The yearly rate of inflation edged up to 3.2%.

Core CPI inflation, excluding food and energy, increased slightly more than forecast, up 0.4% last month and 3.8% from a year ago versus 3.9% in January, a more modest slowdown than the consensus had expected. Even more concerning is the fact that the three-month and six-month moving averages of core inflation accelerated and are moving in the wrong direction for a Fed that is trying to bring inflation to heel. However, there were a few categories with some notable price relief. Food and beverage prices were unchanged. Medical care services and new vehicle prices both fell (-0.1%), and recreation prices increased only 0.2%, a sharp moderation from January’s 0.5% increase.

Bottom Line: This initial inflation report for February is an ugly read that will do nothing to sooth nerves on the FOMC. Inflation remains the number one problem they still have yet to solve. Clearly, restrictive monetary policy has not yet fully done its work and a patient and slightly hawkish Fed must remain in place for the monetary medicine to fully take effect.

Table 1 - United States — CPI

(month/month % change : s.a.)

Source: BMO Economics, Haver Analytics