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Live updates from February inflation report: Consumer prices rise slightly

The Consumer Price Index's inflation report showed that price increases accelerated overall in February, confirming the Federal Reserve's decision to proceed cautiously as officials consider when and to what extent. extent of the fall in interest rates.

Headline inflation rose 3.2 percent last month from a year earlier, up from 3.1 percent in January. That's a notable drop from 2022's peak of 9.1%, but still faster than the roughly 2% that was normal before the 2020 pandemic.

After excluding volatile food and fuel prices to better understand the underlying trend, inflation came in at 3.8 percent, slightly faster than economists expected but down from from 3.9 percent in January.

The magnitude of the increase in this basic measure between January and February was also in focus. The measure rose 0.4% on a monthly basis, a bit faster than economists expected, as airfares and auto insurance rose, even as a closely watched housing measure rose less. quickly.

Economists are closely watching housing and other services inflation measures as they try to determine how long it will take to return inflation to normal. If they prove more stubborn than expected, it could be a sign that inflation will be harder to stamp out completely than policymakers hoped.

So far, inflation has fallen steadily and relatively painlessly: unemployment continues to hover below 4%, and growth in 2023 has been surprisingly strong, even as the Fed raised interest rates to their highest level in more than two decades.

Fed officials are debating how long to keep rates at their current level, around 5.3 percent. High borrowing costs make it expensive for people to borrow to buy a home or expand a business, which can weigh on the economy in the long run. While the Fed works to curb demand enough to keep inflation in check, officials want to avoid crushing growth to the point of causing widespread job losses or a recession.

But some economists worry that slowing inflation so far may be more difficult than achieving the progress made so far. And Fed officials want to avoid cutting interest rates too soon, only to discover that inflation is not fully under control.

“We don't want to find ourselves in a situation where it turns out that the six months of good inflation data we had last year didn't turn out to be an accurate signal of where inflation is going under “underlying,” said the Fed's Jerome H. Powell. chair, said during his testimony before Congress last week. Given this, he added, the Fed is exercising caution.

But Mr. Powell also said last week that when the Fed was satisfied that inflation had fallen sufficiently, “and we're not far from that,” then it would be appropriate to cut interest rates.

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