US inflation above expectations

US inflation rose unexpectedly to 3.2% last month

By Ahmed Azzam | @3zzamous | 12 March 2024

Market close
  • Core CPI tops forecasts for a second straight month

  • Stubborn inflation poses headache for Fed, White House

  • Shelter, gasoline costs drive core measure higher

  • Treasury yields whipsaw; stock futures rise

In a surprising twist, the annual inflation rate in the United States saw a slight increase in February 2024, reaching 3.2%, up from January's 3.1% and outpacing the anticipated 3.1%. This uptick was mirrored in the monthly inflation rate, which escalated to 0.4% from the expected 0.3%, driven largely by rising shelter and gasoline costs that accounted for more than 60% of the monthly increase.

Unexpected rise

Annual inflation hits 3.2%: Exceeds January's 3.1% and forecasts.

Monthly inflation at 0.4%: Surpasses the expected 0.3%.

Despite the overall rise, core inflation, which excludes volatile items such as food and energy, showed a slight deceleration to 3.8% from the previous 3.9%, falling shy of the predicted 3.7%. The monthly core rate held steady at 0.4%, contrary to the anticipated dip to 0.3%.

Core Inflation Eases

Annual core at 3.8%: Down from 3.9%.

Monthly core steady: Maintains at 0.4%.

Major contributors

The Bureau of Labor Statistics highlighted that shelter and gasoline were significant contributors to the month-on-month inflation surge, alongside noticeable price increases in used cars, apparel, motor-vehicle insurance, and airfares—the latter experiencing its most substantial monthly jump since May 2022.


Central Bank's dilemma

February's figures add to the narrative that inflation remains a stubborn challenge, causing central bankers to hesitate on easing monetary policy prematurely. Federal Reserve Chair Jerome Powell hinted last week at nearing the confidence level required to begin rate reductions. However, a broader price pullback is desired by some officials before taking action.

Looking ahead

With the Federal Reserve's next meeting on the horizon and expectations leaning towards maintaining interest rates for the fifth consecutive session, all eyes will be on the upcoming producer price index release for hints on future monetary policy shifts.