February CPI Unchanged

The Consumer Price Index was flat in February on a seasonally-adjusted basis, according to the Bureau of Labor Statistics. That's after a very slight rise of 0.2% in January. Monthly consumer price inflation hasn't been this low since March of last year. Today's data reiterates the view that inflation should not be a concern in the near-term.

First, here's the historical graph via BLS:

10-02 CPI cht 1.PNG

As you can see, inflation is quite low and has been for some time.

The ever-important core CPI -- stripping out food and energy -- was even lower, declining by 0.1%. A slightly deflationary core CPI makes for an even stronger argument that inflation shouldn't be much of a worry right now in the U.S. economy. Generally, a systematic increase in core CPI is what concerns economists. That's certainly not happening currently. Here's a graph plotting the 12-month change of CPI and core CPI:

10-02 CPI cht 2.PNG

As you can see, core CPI (the red line) has been extremely stable and even appears to be trending down a bit.

Interestingly, energy prices were also deflationary in February, decreasing by 0.5% -- the first decline since April. Another standout included apparel, which saw its prices fall by 0.7%. One of the biggest increases was in medical care commodities, where prices rose by 0.8% for the month.

There are some significant policy implications coming out of today's data, especially if you pair it with yesterday's PPI data. First, this supports the Fed's view that inflation will be subdued for the time being. That should help support its desire to keep interest rates low for an "extended period."

Of course, extremely low inflation will also lead politicians to pressure the Fed not to rein in its monetary supply too soon. There's little reason to risk weakening the recovery or causing a double-dip recession through excessive monetary tightening with inflation this low.

Presented by

Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.

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