February 2018 Consumer Price Index

Did you notice prices rising in February?  You’re not the only one.   According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) rose 0.2 percent in February 2018.  This uptick followed January’s jump of 0.5 percent. Its year-over-year trend accelerated too, reaching 2.2 percent versus 2.1 percent to start this year.

Core-CPI matched the monthly uptick, but its twelve-month trend has been more subdued.  After increasing 0.3 percent in January, this less volatile (because it excludes food and energy) series added another 0.2 percent.  Medical care commodities and automobiles (both new and used) declined in the period, but nearly all the other components of core-CPI rose.  Apparel costs jumped 1.5 percent after rising 1.7 percent in January.  Additionally, transportation services increased 1.0 percent, and shelter continued its string of upticks, increasing 0.2 percent.  Versus a year ago, core-CPI is up 1.8 percent, matching the total from three of the previous four months.

Your observations are correct; prices are rising. However, they seem to be doing so at a pace which is slower than the Federal Reserve's explicit target of 2.0 percent.  While core-CPI is not the central bank’s preferred measure of inflation, its trend tends to mimic their favorite price proxy (you can read Atlas’ most recent note covering, among other thing core-personal consumption expenditures here).  As the year unfolds, inflation could become an important phenomenon because it has the potential to alter the central bank’s current inclination to hike the overnight lending rate banks charge each other to borrow two or three more times this year.