Inflation Moderates in February, Beating Estimates, as Gasoline and Air Fares Drop

Consumer prices rose 0.2% in February, or 2.8% annually, coming in below the forecasts of economists, the Bureau of Labor Statistics reported on Wednesday.

Although housing costs rose, accounting for nearly half of the overall increase in the consumer price index, the cost of gasoline dropped 1% while the price of air fares fell 4%.

Food prices continued their upward trend, with the cost of eating out rising 0.4% in the month, while the grocery index was unchanged.

The core index that strips out food and energy costs also increased 0.2% on the month, hitting 3.1% on a 12-month basis.

“The February CPI release showed further signs of progress on underlying inflation, with the pace of price increases moderating after January’s strong release,” said Kay Haigh, global co-head of fixed income and liquidity solutions at Goldman Sachs Asset Management. “While the (Federal Reserve) is still likely to remain on hold at this month’s meeting, the combination of easing inflationary pressures and rising downside risks to growth suggest that the Fed is moving closer to continuing its easing cycle.”