WASHINGTON -- U.S. consumer prices rose 0.2 percent in February, pushed up slightly by higher gasoline and housing costs even as the prices for autos and clothing slumped.
The Labor Department said Tuesday that the consumer price index rose a modest 1.5 percent last month from a year before.
Inflation has been muted despite the solid job market, causing average hourly earnings -- after being adjusted for consumer prices -- to climb 1.9 percent in the past year. This marks the strongest inflation-adjusted wage growth since November 2015, an increase that would likely help consumer spending and economic growth.
The data suggest there's a greater chance that inflation won't hold up around the Federal Reserve's 2 percent objective. That gives the Fed more flexibility in holding off on further increases to a key short-term interest rate, enabling the U.S. central bank to provide support for economic growth.
The report is "certainly consistent with the view that we are going to be tracking at or below the Fed's official goal," said Scott Brown, chief economist at Raymond James Financial Inc. in St. Petersburg, Fla. "So there's no real pressure for the Fed to move anytime soon."
Pressures from tariffs and wages have produced "mixed results in terms of firms' ability to raise the prices of the goods and services they produce," Brown said.
Fed Chairman Jerome Powell made clear Friday that he and his colleagues are in no hurry to adjust interest rates as growth slows and inflation stays subdued. "With nothing in the outlook demanding an immediate policy response and particularly given muted inflation pressures, the committee has adopted a patient, wait-and-see approach," he said in a speech in California.
Policymakers will release updated quarterly projections for interest rates as well as inflation, growth and employment when they gather Tuesday and March 20.
Some economists expect inflation to pick up as the benefits of higher wages flow through the economy.
"Although inflation has slowed in recent months, it should move gradually higher in the spring and summer," said Gus Faucher, chief economist at PNC Financial Services. "Higher energy prices will push up overall inflation, and rising wages will lead businesses to raise prices in an effort to maintain profit margins."
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the consumer price index could breach 2.5 percent by the end of the year, which could create a problem for the Fed if it holds rates at their current level.
Still, even with modest inflation, many Americans are already facing higher prices for basic necessities. Housing costs continue to outpace overall inflation, rising 3.4 percent from a year ago. School tuition and child care costs have increased 3 percent over the past 12 months. Food prices jumped 0.4 percent in February.
Gasoline prices surged 1.5 percent in February, but they're 9.1 percent lower than last year. Clothing prices plunged 1 percent in February, while new-auto prices slipped 0.2 percent and used-car prices dropped 0.7 percent.
Prescription-drug prices fell 1 percent on a monthly basis, the most on record, bringing the annual decline to 1.2 percent -- the largest drop since 1972. Such figures give President Donald Trump another opportunity to claim credit for lower pharmaceutical prices, an issue that he's recently tweeted about several times.
Excluding the volatile energy and food categories, core prices increased 0.1 percent in February and 2.1 percent from a year ago.
Information for this article was contributed by Josh Boak of The Associated Press and by Jeff Kearns, Kristy Scheuble, Sophie Caronello and Carlyann Edwards of Bloomberg News.
Business on 03/13/2019