March 12, 2025
February Inflation - Don't Believe the Hype
In February, consumer prices as measured by CPI, rose 2.8% compared to a year ago, down from 3.0% in January and below expectations for 2.9%. Core CPI (excludes volatile food and energy prices) rose 3.1%, down from 3.3% in January and 0.1% below forecasts. While today’s report indicates some degree of relief after months of stalling progress on inflation, it does not reflect the price increases that will result from recently announced tariffs. Looking forward and based on the current policy path, inflation is likely to rise amid price increases on a variety of goods from food to clothing to automobiles. These higher costs will test the resilience of consumers and the broader economy. For it’s part, the Federal Reserve remains in wait and see mode until there is more clarity on the Trump administration’s policy agenda and the trajectory of inflation. Policymakers are widely expected to keep rates steady at next week’s meeting but updated rate projections could offer some clues as to the Fed’s expected path in the balance of 2025.
- Consumer prices (CPI) increased 2.8% year-over-year. In February, the consumer price index (CPI) increased 2.8% – below expectations for 2.9% and down from 3.0% in January. Transportation services (+6.0%) and shelter (+4.2%) remained key contributors to the overall increase, more than offsetting declines for gasoline (-3.1%) new vehicles (-0.3%). We continue to keep a close eye on shelter costs, which represent nearly one third of the consumer price index and tend to impact the index with a lag. At +4.2% year-over-year, shelter inflation decelerated from +4.4% in January, down from a peak of 8.2% in March 2023. Core CPI (excludes food and energy) increased 3.1% year-over-year, down from 3.3% in January and below expectations for 3.2%.
- Consumer prices (CPI) increased 0.2% month-over-month. In February, consumer prices rose 0.2% month-over-month down from 0.5% in January. Expectations ranged from +0.2% to +0.9% with a median of +0.3%. Shelter costs increased 0.4% (up from +0.3% in December). Core CPI (excludes food and energy) increased 0.2% month-over-month, down from 0.4% in January and below expectations of 0.3%.
