US CPI hits five-year high in February

Consumer prices in the States saw their smallest gain in February since July 2016 even as a measure of underlying cost pressures quickened to an August 2011 high.

The headline consumer price index rose by 0.1% month-on-month and was 2.7% higher on an annualised basis (consensus: 0.1%, 2.7%), and at a five-year high, according to the Bureau of Labor Statistics, even as a dip in the cost of gasoline almost offset increases for food and utility services.

In January, the CPI index had advanced at a 2.5% clip.

So-called 'core' energy prices advanced by 0.2% on the month in February and 2.2% year-on-year (consensus: 0.2%, 2.2%), with the latter down from a 2.3% rise in the prior month.

In comparison to January, food prices were 0.2% higher, even as gasoline prices dropped 3.0% and those for fuel oil by another 0.4%.

Electricity prices increased 0.8% and those for piped gas by 1.5%.

Prices of used cars and trucks were also down sharply, retreating by 0.6% on the month, while those for transportation services jumped 0.7%.

Shelter costs increased 0.3% and those of medical care services by 0.2%.

"But the underlying pressure in the core is to the upside - the three-month annualized rate is 3.0%, the highest since Aug 2011, while the rising headline rate is set to lift survey-based measures of inflation expectations over the next few months," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

"Inflation risk is building."

Paul Ashworth, chief US economist at Capital Economics, was of a similar bent, telling clients that: "Overall, inflation is trending gradually higher and underlying retail sales are healthy enough. Nothing here to suggest the Fed shouldn’t raise interest rates at the FOMC meeting that concludes later today."