Policy: Labor

Inflation slows to just 1.1 percent through February

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Labor,PennAve,Joseph Lawler,Economy,Federal Reserve,Budgets and Deficits,Inflation,Monetary Policy

Inflation slowed to just 1.1 percent annually in February, according to the Consumer Price Index published Tuesday morning by the Bureau of Labor Statistics.

Core inflation, which factors out increases in food and energy prices and is generally less volatile, was higher, at 1.6 percent.

Headline inflation, at 1.1 percent, was slower than December's 1.5 percent and January's 1.6 percent.

Food prices rose 0.4 percent in February, accounting for more than half of the overall price level rise in February, according to the BLS.

At just above 1 percent, inflation, as measured by the CPI, is roughly half of the 2-percent goal that the Federal Reserve has adopted.

Although some investors and Fed analysts have suggested that recent months' data show labor markets tightening, inflation remains below where Fed officials expect it would be in the case of a strengthening economy.

Fed officials, meeting Tuesday and Wednesday in Washington to discuss the central bank's monetary policy, have said it "likely will be appropriate" to keep short-term interest rates near zero until the unemployment rate, which is currently 6.7 percent, falls well below 6.5 percent, especially if inflation remains below the 2 percent target.

Other measures of inflation the Fed monitors tell a similar story — that prices are rising only slowly.

For instance, the personal consumption expenditures chain price index, taken from a different survey than the CPI, also showed core inflation low in January, at just 1.1 percent. The Fed views core PCE inflation as more informative about the underlying trend of inflation than other gauges.

With inflation slowing, rather than picking up, the Fed is less likely to take steps to retreat from its efforts to ease the money supply and signal earlier interest rate hikes.

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