Consumer prices rose by 0.2% (month-over-month) in February, bang-on market expectations. Core CPI (excluding food and energy) also rose 0.2%, ahead of expectations for a 0.1% M/M gain.Energy prices rebounded in Feb, rising by 1.0% (m/m), following seven straight months of declines. increase in energy prices was led by gasoline, which rose 2.4% on the month. Energy prices were still down 18.8% on a year-over-year basis. Food prices rose 0.2% (m/m), accelerating from 0.0% growth in Jan. Food prices are up 3.0% from year ago levels.TD Economics notes …..
- The rebound in price growth in February, however, is less a surprise than a false dawn. The rebound in energy prices in February has been short lived – crude oil prices have fallen again in March and given continued over-supply could continue to fall. Inflation is likely to remain weak through the mid-point of this year, giving the Fed cause to leave rates on hold.
- The level of unemployment has not been much of a factor in current inflation dynamics, but that does not mean it should be ignored altogether. As the unemployment rate pushes towards 5.0%, job growth will begin to eat into “shadow” labor market slack – drawing more marginally attached people into the workforce and contributing to greater full-time job growth. This will eventually give rise to faster wage growth, keeping a floor under inflation.
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