U.S. inflation held steady in February
Inflation held steady in February as consumers prices stayed flat, the government said on Friday, taking some pressure off the Federal Reserve as it considers a new round of interest rate cuts.
The Consumer Price Index was unchanged in February as the cost of gasoline and automobiles declined. The closely watched core index, which excludes the prices of volatile food and energy products, also stayed flat.
The inflation report comes as a relief after several months of steadily building price pressures. With the economy in a significant downturn, and possibly a recession, some had feared a repeat of 1970s-style stagflation. Inflation rose 0.4 percent in January and December, and economists had been bracing for another uptick last month.
Instead, the Labor Department report showed price declines for clothing, transportation-related products, personal computers and commodities. The fall-off came despite a record-low dollar and a rise in the price of imports.
Lower inflation may open the door for the Fed to lower interest rates more aggressively at its next scheduled meeting, on Tuesday. Rate cuts promote growth but devalue the dollar, pushing prices higher. Fed officials have said they were keeping a close eye on inflation developments, but they say staving off a recession remains a top priority.
For the year, inflation is still running high. Compared with a year ago, consumer prices were up 4 percent in February, and the core index rose 2.3 percent, higher than the Feds comfort level.
The cost of food and beverages remained elevated, ticking up 0.4 percent last month after a 0.7 percent rise in January. And oil prices have surged in the last two weeks, climbing to all-time record highs that will probably nudge up energy costs for consumers in March.
Still, economists predict inflation will taper off over the next few months, as economic problems weigh on consumers ability to spend. That lowers incentives for businesses to raise prices, keeping inflation in check.
Consumer confidence has fallen this month, though not as much as economists had feared. An index by Reuters and the University of Michigan fell to 70.5 in March from 70.8 in February, a slight upward revision from the preliminary reading. Still, confidence levels remain near the lowest levels in a decade.
