Inflation's always been a hot topic for economists. But since June 2022, when the Consumer Price Index (CPI) hit its highest level in 40 years (9.1%!) and the Federal Reserve hiked interest rates to their highest level in over 20 years, more folks have become interested in the data.
This is because inflation is a measure of our purchasing power. How much things cost and how quickly prices are rising directly impact not only how far a dollar will stretch for us, but also how far it will go for the companies that we invest in. And very few things make the stock market grumpier than a disappointing profit margin.
More recently, the escalating conflict between the U.S., Israel and Iran has caused oil prices to spike to their highest level in four years, muddying the inflation picture going forward.
February CPI, by the numbers
Higher gas prices had a marginal impact on the February CPI report, though it's likely March data will be affected to a larger degree.
According to the Bureau of Labor Statistics, headline inflation was up 0.3% from January to February, and 2.4% higher from the year prior. Both figures match what economists expected.
Shelter was the largest factor behind the monthly increase in headline CPI, according to the BLS, rising 0.2% month to month. Food and energy costs were also up.
Core CPI, which excludes volatile food and energy prices, was 0.2% higher month over month and up 2.5% year over year, arriving in line with the Street's forecasts.
What is CPI?
"CPI is a measure of the average price of that basket of goods and services over time," writes Kiplinger contributor Coryanne Hicks. "The specific goods and services within the CPI basket are based on information around 24,000 families and individuals give the U.S. Bureau of Labor Statistics on what they buy."
Since inflation peaked nearly four years ago, the CPI and core CPI have declined. Still, inflation remains too high for the Federal Reserve.
So while the Fed has cut interest rates by 1.75 percentage points this cycle in response to a cooling labor market, it's currently expected to keep the target range for the federal funds rate unchanged at its next three meetings, just as it did in January, to see how recent rate cuts are impacting inflation and employment.
So what does Wall Street think about the February CPI report? Here, we look at some of what economists, strategists and other experts have to say about the results and what they could mean for the Fed and investors going forward.
What experts have to say about the February CPI report
"While Wednesday's CPI for February does not account for the recent spike in oil prices, the print was in line with expectations, suggesting that inflation was stable before the Iran conflict. As we move towards the Fed's 2% inflation target and the employment picture continues to weaken, we're on track for at least one rate cut later this year." – Skyler Weinand, Chief Investment Officer at Regan Capital
"Steady disinflation on shelter is a good sign, but tariffs seemed to drive up the apparel category. These inflation numbers provide some comfort, but this month's spike in energy prices make them a relic of the past. Investors and the Fed are in uncharted territory right now, taking their cues from crude oil and tanker traffic in the Strait of Hormuz." – David Russell, Global Head of Market Strategy at TradeStation
"CPI printed in line with consensus expectations for February, a ho-hum release that reflects the period before the escalation of military action in the Middle East that will lift inflation readings next month due to higher energy prices. An encouraging sign was the moderation in both core and 'super core' CPI, showing that price pressures were not accelerating into the current oil price shock, which should give policymakers some degree of comfort. With today's release already largely 'stale' due to recent events in the Middle East, we expect financial markets to have a limited reaction to this news." – Josh Jamner, Senior Investment Strategy Analyst at ClearBridge Investments
"Reading too far into today’s CPI in most respects amounts to arguing over the dinner menu on the Titanic, since the economy has struck an energy cost iceberg. In our view, it confirms that underlying inflation is tracking with employment – which is to say – downward trending. We are adding to our long duration in Treasuries." – Brad Conger, Chief Investment Officer at Hirtle Callaghan
"For investors, it’s important to look through short-term energy-driven moves and build diversification and portfolio resilience. The Federal Reserve is likely to remain on hold in the near term. Resilient growth and a labor market that is cooling without sharply deteriorating give policymakers time to assess incoming data. Near-term inflation risks are tilted slightly higher if geopolitical tensions keep energy prices elevated." – Gargi Chaudhuri, Chief Investment and Portfolio Strategist, Americas at BlackRock
