US Consumer Prices Rise In Line With Estimates In February

In January, the jump in CPI prompted an aggressive selloff in stocks amid interest rate fears. The HICP rate remains far below the ECB's 2% limit for price stability, but central bankers are starting to see encouraging signs in underlying inflation.

Crude oil futures were lower Tuesday amid expectations that USA oil inventories rose for a third week in a row. Both headline and core prices rose an on-trend 0.2% in February, with the 2.2% headline rate for the last 12 months, and the 1.8% core, both matching consensus. Prices for wholesale services rose 2.8 percent over the past year, the biggest annual gain in records that date back to 2010. It remained unchanged at 1.5% in the year to January from the previous month. The Federal Reserve's most recent beige book said prices increased across the a "moderate pace", after months of some districts reporting less robust "modest" price growth. "Just tapping on the brakes every quarter seems like a likely scenario".

It still is the best of times for the U.S. economy for in spite of President Donald Trump's micro-management the S&P 500 index remains 3.4% in the green so far this year and 10-year bond yields have fallen from the 2.94% high recorded in late February to 2.84% overnight. Wireless-phone services, which constrained inflation a year ago, fell 0.5%. Meanwhile, core services inflation has been on a stable trajectory in the past few months. It had already been weak across other G10 currencies after USA inflation data came in as per forecasts but it skidded further as the sell-off accelerated. The retracement in February average hourly earnings, per the latest payrolls report, serves as a reminder that wage pressures remain tame. WTI crude for April delivery fell $0.65 or 1.1 percent to close at $60.71 a barrel on the New York Mercantile Exchange. Hospital services, another component watched by analysts, fell 0.5%.

A similar conclusion can be drawn from the producer price report as it was in yesterday's consumer price report, according to Stifel Chief Economist Lindsey Piegza: While headline inflation continues to run relatively on target, core inflation continues to evade the Federal Open Market Committee's 2% objective. Housing costs increased 0.3% versus 0.2%, with owners' equivalent rent up 0.2% versus the prior 0.3%.

Prices for women's and girls' apparel increased 1.5% in February, while men's and boys' clothing prices were up 1.7%. We have also noted price increases across some major food items during our food survey in the month. It estimates the tariffs could push CPI inflation highery by about 0.1 percentage point.

Information for this article was contributed by Kristy Scheuble and Benjamin Purvis of Bloomberg News.

Vanessa Coleman