Inflation cooled again in February as the increase in consumer prices over the past year dropped to 6%, the lowest level since September 2021. That's a decrease from 6.4% the month before.
While the U.S. government's latest consumer price index (CPI) report indicates inflation is slowing down, the annual pace of inflation is still well above the 2% level the Federal Reserve considers its target in the long run.
The report, released Tuesday by the Bureau of Labor Statistics, gives the central banking system lots to consider ahead of a complicated decision next week on interest rates (its primary tool to control rising prices). Due to the pace of inflation and the competition in the labor market, another rate hike was widely expected — until the collapse of Silicon Valley Bank on Friday.
Some economists think the Fed will now hold off on raising rates in light of the bank failure, given that SVB collapsed after its investments dropped in value due to higher rates, leading to panic among depositors.
Andrew Patterson, a Vanguard economist, explained in a note Tuesday that the Fed has “to be careful in balancing the risks of price and financial stability," adding that inflation in the price of services remains very high.
But goods are affected, too. In February, prices also soared for a number of items including frozen fruits and vegetables, plane tickets and women’s dresses. Here are five highlights from the new inflation report:
The CPI report said higher shelter prices were the the biggest contributor to inflation between January and February. The shelter index, which includes rent and home ownership, is up 0.8% in the past month and up 8.1% in the past year.
Housing economists expect rent prices to come down in 2023, and they have already fallen in some markets, but that hasn't shown up in the CPI data yet.
It's an expensive time to fly due to significant travel demand and high jet fuel prices, according to travel site Hopper.
Airline fares went up by 6.4% from January to February. Prices are now a whopping 26.5% higher than they were last February, according to the CPI report.
The increase in the price of food at restaurants outpaced the overall monthly inflation rate of 0.4% in February. The CPI's "food away from home" index is up 0.6%.
Grocery inflation came in lower at 0.3%, but prices for certain food items shot up. The price of frozen fruits and vegetables increased by 4.5% in February, the price of ham increased by 3.3%, and the price of peanut butter increased by 2.5%.
Apparel prices increased by 0.8% in February, driven by higher prices for women's clothes. The price of women's dresses, for example, increased by 6.5%, as the broader index for women's and girls' apparel went up by 1%.
The price of men's and boys' apparel, on the other hand, fell by 0.4%. A category of men's apparel that includes suits, sport coats and outerwear was down 4.7%.
While tickets for movies, theaters and concerts got slightly cheaper in February, the price of attending sporting events increased by 4.2%, according to the CPI.
Overall, the price of recreation services is up 1.2%, with a 1.8% increase in the price of cable, satellite and live streaming television service contributing to the rise.