3-13-18 10:32 AM EDT | Email Article
By Harriet Torry 

WASHINGTON -- U.S. consumer prices rose in February at a slightly slower pace than the month before, tempering earlier signs of a pickup in inflation.

The consumer-price index, which measures what Americans pay for everything from shampoo to hotel stays, rose 0.2% in February after rising a seasonally adjusted 0.5% in January, the Labor Department said Tuesday.

Inflation "moved back into 'no cause for alarm' territory with the February CPI report," Navy Federal Credit Union economist Robert Frick said in a note to clients.

Excluding the volatile food and energy categories, so-called core prices rose 0.2%, compared with 0.3% in January. The month-over-month readings were in line with economists' expectations, although annual readings slightly undershot economists' forecasts.

In the year to February, overall prices rose 2.2%, while core prices were up 1.8% on the year. Economists expected a 2.3% increase in overall inflation and core prices to rise 1.9%.

The reading comes a week before Federal Reserve officials' next scheduled policy meeting in Washington. Financial markets place a very high likelihood on a quarter-percentage-point increase in short-term interest rates from their current range between 1.25% and 1.5% at the March 20-21 meeting. Following Tuesday's release, fed-funds futures tracked by CME Group show investors priced it in with a 86% probability.

Fed policy makers have penciled in three rate increases this year, and have been monitoring the inflation picture closely, looking for signs that a tightening labor market and continued economic growth are generating stronger wage and price increases after years of weak inflation.

Tuesday's reading marked the third straight month in which core prices have risen at an annual rate of 1.8%, suggesting inflation is rising at a moderate pace. Real average hourly earnings were flat in February and real average weekly earnings rose a seasonally adjusted 0.3% on the month.

The report showed an index of energy prices rose 0.1% in February, as gasoline and fuel oil costs both fell. The price index for new vehicles declined for the second straight month, falling 0.5%. Apparel prices rose 1.5% on the month and transportation services increased 1%. Airline fares rose 0.6% on the month but were down 5.4% on the year, while the cost of wireless telephone services dropped 0.5% from January and are down 9.4% from February 2017.

Tuesday's report follows the Labor Department's February jobs report last week, which showed average hourly earnings for private-sector workers rose 2.6% in February from a year earlier, a slight pullback from the 2.8% annual wage gain in January.

Taken together, the reports suggest wage pressures remain relatively benign.

Write to Harriet Torry at harriet.torry@wsj.com


(END) Dow Jones Newswires

March 13, 2018 10:32 ET (14:32 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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