Gas prices are climbing again, up 3.8% in February after four straight monthly declines. With spring approaching, demand is rising, and producers are switching to more expensive summer blends. On the flip side, grocery prices remained unchanged, lowering the annual increase to just 1% – the smallest since June 2021. This provides some relief to consumers from hefty price gains experienced over the past two years.
The climb in fuel costs and rent offset flat food prices. Overall prices rose 3.2% from a year earlier, slightly up from 3.1% in January, according to the Labor Department’s consumer price index. On a monthly basis, costs increased 0.4% following a 0.3% gain the previous month. Core prices, which exclude volatile food and energy items and are watched more closely by the Federal Reserve, increased 0.4% after a similar rise in January. That still lowered the annual increase from 3.9% to 3.8%, the smallest since May 2021.
Since hitting a 40-year high of 9.1% in June 2022, inflation has slowed substantially. But after swift progress in the fall, price increases have become more volatile. Many goods, such as used cars, furniture, and appliances, have gotten cheaper as pandemic-related supply chain snags have resolved. However, the cost of services like rent, car insurance, and transportation keep advancing, partly due to sharply rising employee wages.
Fed Chair Jerome Powell told Congress last week that the central bank will likely trim its key interest rate this year but not until officials see more evidence that inflation is moving sustainably toward the Fed’s target. Since March 2022, the Fed has hiked its benchmark short-term rate from near zero to a 22-year high of 5% to 5.25% to corral inflation, though officials have paused since July. In the past couple of months, futures markets have pushed out their forecast for the first Fed rate decrease from March to June and are now predicting four rate cuts this year, down from six.
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