The February Consumer Price Index (CPI), which measures changes in prices paid by consumers for goods and services, was released earlier today for the month of January and showed an increase of 0.5% m/m and +3.0% y/y. This came in above economists' expectations of 0.3% m/m and marked the third consecutive month of 0.1% increases. Shelter continues to be the main driver behind swings in CPI. Shelter was +0.4% m/m in January and accounted for 30% of the increase.
CPI Home: U.S. Bureau of Labor Statistics (bls.gov)
The table below shows m/m percentage changes in CPI indexes which include Core CPI, Food and Energy (Core CPI excludes Food and Energy).
Source: Consumer Price Index Summary (bls.gov)
One of the two major focuses of the Federal Open Market Committee (FOMC) is price stability, which is still running above the target range of 2%. Per the Federal Reserve’s January 29th release, members reemphasized their commitment to using the tools at their disposal to try and return inflation to the target. The FOMC’s next decision regarding fed fund rates will be announced on March 18-19, 2025. The CPI summary for February is scheduled to be released on March 12, 2025.
The FOMC laid out their expectations for 2025 back in December via their Summary of Economic Projections (SEP). The SEP showed two cuts to the Federal Funds Rate in both 2025 and 2026. Current market odds place the chance of only one rate cut happening in the fourth quarter of 2025. The Fed is in a spot where rates are going to remain higher for longer as inflation remains persistent and the economy remains stable.
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