Inflation gains in February
WASHINGTON — Consumer prices rose at the fastest pace in four months in February and home sales fell, fresh signs that inflation and higher interest rates may be exacting a toll on the U.S. economy.
The latest snapshot of inflation, released by the Labor Department on Wednesday, raised the chances that the Federal Reserve might have to be more aggressive in its interest rate-raising campaign, economists said.
The consumer price index jumped 0.4 percent in February as costs rose for items like energy, health care and education. The pickup in inflation came after consumer prices were flat in December and increased by just 0.1 percent in January.
Separately, the National Association of Realtors reported that sales of previously owned homes dipped 0.4 percent in February to a seasonally adjusted annual rate of 6.79 million. But while sales fell, home prices continue to rise sharply. The median price for existing homes — where half sell for more and half sell for less — was $191,000 in February, an 11 percent increase from the same month a year ago.
The February consumer price data underscored the more hawkish tone on inflation that Fed policy-makers took Tuesday.
“Pressures on inflation have picked up in recent months,” Fed policy-makers said. They also noted that pricing power — the ability of companies to raise prices to customers — is “more evident.”
That assessment accompanied their decision to boost the overnight bank lending rate by a quarter point to 2.75 percent. It was the seventh such increase since the Fed began bumping up rates last June in an effort to prevent inflation from hurting the economy.
“It’s clear that Fed members saw this coming their way,” Oscar Gonzalez, economist at John Hancock Financial Services, said about inflation accelerating. “Inflation is rising, but the sky isn’t falling.”
Sharp increases in energy costs, including gasoline, led the way in February. But many other prices, including those for air travel, medical care, education and lodging also climbed.
Excluding energy and food prices, core prices rose 0.3 percent in February. That compared with a 0.2 percent increase in January and was the largest increase since September.
For the 12 months ending February, core prices rose 2.4 percent, the fastest pace since August 2002.