US consumer prices rose in line with expectations in February, with inflation holding steady just above the Federal Reserve’s target as policymakers weigh the potential impact of rising oil prices linked to Middle East tensions.
The consumer price index rose 0.3 percent in February from the previous month, bringing the annual inflation rate to 2.4 percent, according to data released Wednesday by the Bureau of Labor Statistics.
The figures matched market forecasts and showed that price pressures remained broadly stable compared with January.
Excluding the more volatile food and energy categories, the so-called core CPI increased 0.2 percent for the month and 2.5 percent on an annual basis, also in line with expectations. Core inflation is closely watched by the Federal Reserve as an indicator of underlying price trends.
The latest data suggests inflation remains above the Fed’s 2 percent target but is not accelerating.
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Housing costs continued to contribute to overall inflation, though the pace of increases slowed. Shelter prices rose 0.2 percent in February, bringing the annual gain to about 3 percent.
Within that category, rent increased just 0.1 percent during the month, marking the smallest monthly rise since January 2021 and offering a sign that housing-related inflation may be easing.
Food prices increased more quickly, climbing 0.4 percent in February and rising 3.1 percent compared with a year earlier. However, some grocery items posted declines. Egg prices fell 3.8 percent during the month and were down 42.1 percent from the same period last year following earlier supply disruptions that had pushed prices sharply higher.
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Energy prices rose modestly, increasing 0.6 percent during the month and 0.5 percent compared with a year earlier.
Several goods categories showed weaker price growth or declines. New vehicle prices were unchanged in February and were up just 0.5 percent from a year earlier. Prices for used vehicles and auto insurance also declined.
However, apparel prices rose sharply by 1.3 percent during the month — the largest increase since 2018 — reflecting pressures from tariffs and supply chain adjustments affecting clothing imports.
Financial markets showed little immediate reaction to the inflation data. Stock futures were mixed while Treasury yields edged higher, suggesting investors largely expected the outcome.
Economists noted that the February figures provide a snapshot of inflation conditions before a new potential shock linked to geopolitical tensions in the Middle East.
Recent military escalation involving Iran has pushed crude oil prices higher amid concerns about disruptions to global energy supplies. Oil briefly surged above $100 per barrel earlier in the week before easing somewhat in subsequent trading.
Higher energy prices often feed into consumer inflation through increased costs for gasoline, transportation, and logistics, which can then influence the prices of a wide range of goods and services.
Analysts say the inflation outlook could therefore become more uncertain in the coming months if energy costs remain elevated.
For now, the February report reinforces expectations that the Federal Reserve will keep interest rates unchanged at its next policy meeting scheduled for March 18.
Traders widely expect the central bank to remain on hold as officials assess how previous interest rate cuts and global developments affect the US economy.
Market expectations currently point to the next possible rate cut around September, with some investors anticipating a second reduction before the end of the year.
Despite concerns that tariffs and geopolitical tensions could push prices higher, the latest data suggests that inflation in goods categories remains relatively contained while services prices — including medical care, airline fares, and lodging — continue to rise.
For policymakers, the challenge will be determining whether new energy price pressures represent a temporary shock or the beginning of a broader inflationary trend.
The February inflation report suggests stability for now, but economists warn that the outlook could shift quickly depending on developments in global energy markets and geopolitical tensions.
