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The consumer price index for February contained no real surprises for Wall Street. While headline prices jumped 0.6% on the month, the core rate -- which excludes volatile food and energy prices -- rose a subdued 0.1%, and was up 1.7% on a year-over-year basis. Those figures suggest that underlying inflation pressures remain subdued.
The headline figure, which came in as expected, was pumped up on higher energy costs, along with another large increase in food prices. The latter may have been exacerbated by delivery problems from the President's Day winter storm. Energy prices rose 6.1%, led by a 10% jump in gasoline and a 16% gain in fuel oil. Food and beverage costs rose 0.6%.
The two components of the core index that presented the most upside risk to inflation in recent years were very favorable in February. Shelter costs were unchanged after rising 0.3% in January, while medical care costs rose only 0.1% for the second straight month. Also holding back the index was a 0.2% decline in apparel and a 0.1% drop in new vehicle prices.
Overall, the core index's 1.7% year-over-year rise was the smallest such gain since March, 1966. The data reiterate no reason for the Fed to be worried about inflation -- even with the sharp gains in energy -- which now appear to be well behind us.
From MMS International
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