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The US Labor Department has reported that the Consumer Price Index rose 0.2% in February, driven largely by the increased cost of food, gasoline, and rent.

Key Takeaways

• U.S. consumer prices rose for the first time in four months in February, although with the smallest annual gain in over two years.
• The Labor Department reported that the CPI rose 0.2%.
• Core-CPI rose 2.1%, above market expectations and now rising three months in a row.
• Inflation pressure rose 1.5%, down from January’s increase of 1.6%.

After no change for three months, the CPI has risen 1.5%, and even then at the smallest gain since September 2016. The CPI increased 1.6% annually in January.

The core-CPI, which excludes the volatile components of energy and food, rose just 0.1%, the smallest gain since August 2018 and below market expectations of 0.1%.. The core-CPI has now increased for three consecutive months.

Gasoline rose 1.5% after a major 5.5% drop in January. Food rose by 0.4%, the biggest jump since May 2014 after a 0.2% increase the month prior. Food consumed at home rose 0.4%.

A gauge measuring cost of paying or receiving rent rose by 0.3% after a similar gain the month before. Healthcare fell 0.2% after a rise of 0.2% in January, and apparel rose 0.3% after a 1.1% increase the month prior. The cost of vehicle insurance, household furnishings, and personal care products rose while the cost of vehicles, used cars and trucks, and recreation fell.

Annual rates of inflation, using the core CPI, have returned to their lowest reading in the last 12 months https://t.co/AWI3WSeqgz pic.twitter.com/HaFqZRuHHg

— Nick Timiraos (@NickTimiraos) March 12, 2019

PCE and Inflation

The Federal Reserve monitors the core personal consumption expenditures (PCE) index as an indicator to inform monetary policy surrounding inflation.

The PE index increased 1.9% annually in December, similar to the month before, and hit the target range of 2% 12 months ago for the first time since April 2012.

Inflation is being kept in check by the general economic slowdown taking place worldwide, with a recent Reuters poll indicating that the likelihood of a recession has risen.

On Sunday, Fed Chairman Jerome Powell indicated that there were no upcoming rate hikes due to current economic conditions, supporting previous statements regarding “patient” monetary policy from the Fed.

Wage growth in February saw the biggest increase since April 2009, rising 3.4% from 3.1% in January. The wage growth has helped increase affordability of housing and alleviated some pressure from the housing market.

Expert Outlook

Jim Wyckoff, senior technical analyst at Kitco.com, states that the data supports low interest rate policy.

“This continues a theme of low and non-problematic inflation in the major world economies, which is allowing the central banks to keep interest rates low,” he said.

Avery Shenfeld, senior economist at CIBC Capital Markets, agreed, stating that the report may not have a major market impact.

“Inflation hasn't been the focal point for markets, and February's slightly softer than expected U.S. readings suggest that it's going to remain a non-issue for a while,” he said. “Nobody was really that worried about inflation given how low 10 year rates already sit.”

Market Reaction

The cost of gold was likely impacted by the report, rising approximately $10 in today’s session but still facing strong resistance near $1,300. Gold last traded at $1,296.80/oz, down 0.02% with a high of $1,299.62/oz and a low of $1,290.80/oz.