Inflation increases in February, predates new soaring energy prices: CEI analysis

The Consumer Price Index report for February shows a 0.3 percent increase across all sectors. The increase predates the escalation in the Middle East, which has caused energy prices to skyrocket.

CEI research fellow Steve Swedberg:

“This month’s CPI report largely reflects economic conditions prior to the recent escalation in the Middle East pushing energy prices higher. Since the CPI data are collected in advance of publication, much of the recent movement in oil and gasoline prices has likely fallen outside the data used for this month’s report. While policymakers often emphasize core CPI, which excludes food and energy due to their short-term volatility, those categories still play a major role in household finances.

“Energy accounts for 6.3 percent of the CPI basket, but its effect on household budgets and the broader economy is much larger. Higher fuel costs raise transportation and production expenses across the economy. These price increases often ripple through supply chains and consumer prices over time. The longer the Strait of Hormuz remains closed, the greater the upward pressure on energy prices. Even if today’s CPI data seem relatively stable, rising energy costs could still reduce household purchasing power and weigh on affordability in the months ahead.”

CEI senior economist Ryan Young:

“While energy prices in February rose twice as fast as the overall CPI, President Trump’s Iran war had nothing to do with it. His strikes began on the last day of February, so the current gasoline price spikes will not show up until March’s data is released next month.

“Leaving energy aside, core CPI inflation is still above target at 2.5 percent over the last year and has remained above target for five years now. This would usually encourage Fed officials to raise interest rates and bring inflation down, but job losses in February and slower overall growth over the last year make that a risky proposition. Look for the Fed to hold rates steady at next week’s interest rate meeting.”