Inflation rate ticks up as Fed decides on interest rates

With average weekly earnings up 3.7%, rising incomes are helping Americans keep up with rising costs.
A person pushes a cart through a chip aisle at the store.
Posted at 9:43 AM, Mar 12, 2024

The consumer price index, the top measure for inflation in the U.S., increased to 3.2% in the 12-month period ending in February, which was up from 3.1% in January. The Bureau of Labor Statistics released the updated consumer price index on Tuesday. The rate remains a far cry from the over 9% inflation rate the U.S. faced in mid-2022. 

The U.S. inflation rate remained relatively steady in the last half of 2023, staying between 3% and 3.7%. The U.S. inflation rate in February 2023 was 6%.

Between the months of January and February 2024, the price of consumer goods increased 0.4%. 

The consumer price index weighs the costs of goods based on their importance. Items like food, shelter and energy tend to be weighted more heavily.

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The once sky-high inflation on food at the grocery store has cooled to near-normal levels. Food meant to be consumed at home has gone up 1% in the last year, the Bureau of Labor Statistics said. Some common grocery staples, such as milk, eggs, coffee, and butter, were cheaper this February compared to last February.

The biggest driver keeping inflation elevated is shelter, which was up 5.7% last month compared to February 2023. 

The new inflation data comes about a week before the Federal Reserve meets to consider changing federal interest rates. In January, the Federal Reserve held interest rates at their highest levels since early 2001. 

Federal Reserve Chair Jerome Powell has made it the Fed's goal to get inflation to an annualized rate of 2%. Powell has suggested the Federal Reserve will lower interest rates early in 2024 as inflation stabilizes. But it's unclear whether the latest consumer price index would cause hesitation by Powell and the Fed.

"We believe that our policy rate is likely at its peak for this tightening cycle. If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year," Powell said in a report to Congress last week. "But the economic outlook is uncertain, and ongoing progress toward our 2% inflation objective is not assured."

The new data also suggests that wage increases more than kept up with inflation in the last year. Average weekly earnings are up 3.7% in the last year, according to the BLS.