Prices gained a surprise drop in February, according to the latest inflation report. (action))
Annual inflation increased to 2.8% in February, an unexpected drop of 3.0% in January, according to the consumer price index (CPI) Released by the Bureau of Labor Statistics (BLS).
Inflation increased by 0.2% per month after the 0.5% increase in the previous month. Basic inflation, which excludes volatile energy and food prices, increased at a higher rate by 3.1% in February compared to the previous year, slightly decreasing compared to the rate of the previous month by 3.3%. Housing inflation (shelter) increased by 4.2% and food prices accelerated by 2.6% in the last 12 months, slightly compared to 2.5% in January. Inflation and basic accommodation have recorded their lowest readings since 2021.
The prices of titles and basic increased 0.2% per month, aligning the objective of the federal reserve. However, the imminent uncertainty about the import rates proposed by President Donald Trump and their potential impact on future prices remain a concern.
“The uncertainty about prices remains a huge source of concern for investors, consumers and businesses,” said Jim Baird, director of investments at Plante Moran Financial Advisors, in a press release. “Understanding that the rules of the game change is one thing; understanding what these rules will be and when they are clearly defined are another thing.”
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Fed still likely to retain the rate drops
According to the first American economist Sam Williamson, the modest improvement of the IPC report is a positive sign for the continuous effort of the federal reserve to reduce inflation. Although it is not enough to cause a drop in rate in March, it maintains the rate drops on the table.
“The little surprise of the disadvantages in today's IPC report is an encouraging sign for the continuous efforts of the federal reserve to reduce inflation,” said Williamson. “However, modest improvement is not yet sufficient to cause a drop in the March rate, but it potentially gives the Fed a greater flexibility to consider more rate drops later this year.”
The Federal Reserve, which held interest rates from 4.25% to 4.50% In January, adopted a cautious approach. This is in response to strong economic indicators which gave the central bank more space to wait. The president of the federal reserve, Jerome Powell, said that the central bank intended to remain cautious about the drops in additional rates, as long as the labor market remains solid and that prices continue to climb.
“Many categories have made an encouraging disinflation progress last month, including food, energy and refuge,” said Williamson. “The prices of new vehicles and tariffs of airlines have in fact reduced from one month to another. However, the impact of new prices has probably not materialized, leaving uncertainty concerning inflation when approaching spring, supporting the prudent Fed approach in the coming months.”
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The accommodation remains out of reach
Americans who praise or seek to buy a house always feel the pain of raising housing costs. The inflation of the refuge, an important component of global inflation, is a key factor which must be addressed to bring inflation to the target target of the Fed. However, the lower inflation of the refuge has no impact on the affordability of housing or the lack of housing supply.
“The bad news is that the rental prices and the prices of houses will not refuse en masse, in particular given the underinvestment in single-family houses in the bust era after the accommodation,” said Baird. “Higher prices are likely to stay.
A recent real estate.com report On the field of the housing supply showed that it reached 3.8 million in 2024 and said that it would take 7.5 years to fill the housing gap and resolve a supply shortage which was the main engine of the housing affordability crisis.
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