WASHINGTON -- The cost of living in the U.S. was little changed in February, showing inflation is making scant progress toward the Federal Reserve's goal ahead of the policymakers' meeting this week.
The consumer price index rose 0.1 percent in February, matching January's increase, the Labor Department said Tuesday. In the past 12 months, prices have risen just 1.1 percent, down from 1.6 percent in January and the smallest yearly gain in five months.
Excluding the volatile food and energy categories, core prices rose 0.1 percent last month and 1.6 percent in the past year.
"There isn't much in this report to suggest inflation is about to make a move to the upside or downside," said Michael Feroli, an economist at JPMorgan Chase. Feroli pointed out that core inflation has been below the Federal Reserve's 2 percent target for the past year.
Energy prices fell 0.5 percent because lower gasoline and electricity costs offset higher prices for natural gas and heating oil. Clothes and used cars also were cheaper last month.
Still, consumers took a hit at the grocery store as food costs rose 0.4 percent, the most in nearly 2 ½ years. Beef prices jumped 4 percent in February, the most in more than 10 years, as recent droughts have pushed up cattle feed prices. Milk, cheese and other dairy prices also rose.
The big drop in the annual inflation rate to 1.1 percent comes as the Federal Reserve starts a two-day policy meeting, its first under new chairman Janet Yellen. Low inflation has enabled the Federal Reserve to pursue extraordinary stimulus programs in an effort to boost economic growth.
The Fed is now trying to unwind some of that stimulus. It is purchasing $65 billion in bonds this month, down from $75 billion in January and $85 billion last year. The bond purchases are aimed at lowering long-term interest rates to encourage more borrowing and spending.
Fed policymakers are expected to announce another $10 billion cut today.
The slowdown in the annual inflation rate occurred partly because energy prices spiked in February 2013, and that figure has now fallen out of the year-over-year calculation. As a result, economists don't think the rate will fall much further.
"We will see improvement as the year goes on and weather improves," said David Sloan, a senior economist at 4cast Inc. in New York. "The pace of increase will be fairly moderate. It suggests we're going to get respectable economic growth, but maybe not a strong acceleration."
Information for this article was contributed by Christopher S. Rugaber of The Associated Press and by Michelle Jamrisko, Jeanna Smialek and Ainhoa Goyeneche of Bloomberg News.
Business on 03/19/2014