Inflation rose again in February and remains above the Federal Reserve’s long-term target ranges, suggesting the Fed will not begin rate cuts until at least the summer. The consumer price index (CPI) increased 0.4% on a month-over-month basis in February and 3.2% on a year-over-year basis. The Fed has repeatedly stated its goal is 2% annual inflation.
As in recent months, the index for shelter rose by 0.4% in February. The index for gasoline also increased last month, growing by 3.8%, according to the U.S. Bureau of Labor Statistics. Combined, shelter and gasoline accounted for over 60% of the monthly increase for all items.
“The Fed’s ability to address rising housing costs is limited because increases are driven by a lack of affordable supply and increasing development costs,” the NAHB wrote in its analysis of February inflation data. “Additional housing supply is the primary solution to tame housing inflation. The Fed’s tools for promoting housing supply are constrained.”
The index for shelter makes up more than 40% of the “core” CPI. The indexes for owners’ equivalent rent increased by 0.4%, and rent of primary residence increased by 0.5% over the month. The NAHB says increases in both categories have been the largest contributors to headline inflation in recent months.
The “core” CPI increased by 3.8% over the past 12 months, following a 3.9% increase in January. The annual growth rate was at its slowest pace since May 2021.
