Inflation firms in February, without major acceleration

New York

US consumer prices continued to firm in February, indicating inflation is creeping up towards the Federal Reserve's target without the kind of breakout that would warrant a faster pace of interest-rate hikes.

Both the main consumer price index and the core gauge, which excludes food and energy, rose 0.2 per cent from January, matching the median estimates of economists, a Labour Department report showed on Tuesday. The CPI was up 2.2 per cent in the 12 months through February, compared with 2.1 per cent in January, while the core index increased 1.8 per cent from a year earlier for a third month.

The data indicate that inflation is gradually picking up without any big acceleration. That's in line with policymakers' outlook for price gains steadily approaching their goal and officials' projection for three quarter-point interest-rate hikes this year, including one anticipated at the Fed's meeting next week.

"The report suggests it's more of the same: a gradual pace of rate increases, and again there's nothing here that suggests the Federal Reserve needs to slam on the brakes" with a more aggressive rate-hike strategy, said Scott Brown, chief economist at Raymond James Financial in St Petersburg, Florida. "Just tapping on the brakes every quarter seems like a likely scenario." With this report, it's clear the Fed is "almost certainly raising rates this month but certainly there's no reason to do more, like 50 points", Mr Brown said.

Wall Street's main indexes rose on Tuesday as fears of faster interest rate hikes eased after the release of the CPI data. The markets took comfort that US consumer price growth slowed in February amid a decline in petrol prices and a moderation in the cost of rental accommodation.

The data was the latest indication that an anticipated pickup in inflation probably will be only gradual, providing little reason for the Federal Reserve to raise interest rates more than three times in 2018. BLOOMBERG, REUTERS