Price increases continued in February but at their slowest pace in over a year.
On Tuesday, data released by the Labor Department found the consumer price index (CPI), a measure of the prices of goods and services, rose at an annualized rate of 6% in February, down from 6.4% in January.
So-called core CPI, which excluded food and energy prices, rose 5.5% in February compared to the previous year, down 5.6% in January.
The Wall Street Journal noted economists “view so-called core prices as a better indicator of future inflation.”
Month-to-month, prices rose 0.4% in February, down from 0.5% in January.
However, core prices rose 0.5% in February, up from 0.4% in January.
Inflation has fallen from its high of 9.1% in June 2022. And February’s data marks the smallest increase since September 2021.
Heather Long, an economic columnist for The Washington Post, noted February’s report marked eight consecutive months of decline.
Encouraging signs in the inflation report:
— Heather Long (@byHeatherLong) March 14, 2023
-8th straight month of decline
-6% inflation for past year (still high, but going down)
-0.4% monthly inflation (down from 0.5% in January)
-Gas and used cars down pic.twitter.com/yrT82ncLEX
In a statement, President Joe Biden reacted to the latest report as he said, “Today’s report shows annual inflation is down by a third from this summer at a time when the unemployment rate remains near a 50-year low.”
“As I’ve long said, and as challenges in the banking sector remind us, there will be setbacks along the way in our transition to steady and stable growth. But we face these challenges from a position of strength,” he continued, adding, “We will continue to make progress in our fight to build an economy from the bottom up and middle out, not top down.”
Finally, Biden said, “I will do everything in my power to prevent us from going backwards on the progress we’ve made – including by standing up to Congressional Republicans who threaten economic catastrophe over the debt limit in order to secure tax cuts for the wealthy and large corporations and reckless cuts to critical programs that American seniors and families count on.”
The lower inflation rate comes as the Federal Reserve has carried out a series of interest rate hikes to curb price increases.
And there was speculation it could raise its benchmark interest rate by a half-percentage point during its March 21-22 meeting.
However, the collapse of Silicon Valley Bank (SVB) may lead the Fed to re-calculate. USA Today explained the impact rate hikes had on the bank as it noted “SVB depositors, largely tech start-ups, began withdrawing their money to cover operating costs as venture capital funding dried up.”
“SVB was forced to sell bonds that had tumbled in value because of the Fed rate increases, raising concerns about its solvency and intensifying the bank run,” it added.
In a Sunday memo after the SVB collapse, Goldman Sachs wrote, “In light of recent stress in the banking system, we no longer expect the (Fed) to deliver a rate hike at its March 22 meeting with considerable uncertainty about the path beyond March.”
