The rise in inflation has heightened concerns about its potential impact on the Federal Reserve’s interest rate policy (Reuters)

US consumer prices rose in February, driven by higher fuel and living costs, reinforcing concerns about persistent inflation and its potential impact on the Federal Reserve's interest rate policy.

Reuters quoted the latest reports issued by the Bureau of Labor Statistics of the Ministry of Labor, indicating a noticeable increase in indicators.

Rising prices

The Consumer Price Index (a key measure of inflation) rose 0.4% in February, after a 0.3% increase last January.

Fuel and living costs, including rents, played an important role in this rise, as they accounted for more than 60% of the recorded monthly increase.

On an annual basis, the Consumer Price Index rose 3.2% in February, slightly higher than the 3.1% increase in January.

Despite moving away from the peak level of inflation in America of 9.1%, which was recorded in June 2022, the pace of inflation has continued to rise in recent months.

Core inflation, which excludes volatile food and energy prices, also beat expectations, increasing by 0.4% from January and 3.8% from a year ago.

Economists consider this measure crucial because it reflects underlying inflation trends more accurately.

Significant increases were observed in the prices of used cars, air travel and clothing, indicating broader pressures on consumer spending.

Fed warning

Continued inflationary pressures have reinforced the Federal Reserve's dovish stance on interest rate adjustments.

Bank President Jerome Powell had indicated that the levels of confidence required to lower interest rates were approaching, but stressed the need for a broader decline in prices before any shifts in policy, according to what Bloomberg quoted him as saying.

Market reactions were mixed, with initial optimism followed by focus on strong headline numbers.

Treasury bond yields rose, while the Standard & Poor's 500 index saw slight gains, according to Bloomberg, reflecting investors' uncertainty amid inflation fears.

Powell recently hinted at the approaching levels of confidence required to lower interest rates (Reuters)

Despite inflationary pressures, the US labor market has maintained its strength, with real income continuing to rise annually.

Bloomberg said wage growth outpaced inflation, providing some relief to consumers amid rising costs of living.

The latest data highlighted healthy employment trends in February, despite a marginal increase in the unemployment rate, which the agency said indicates labor market resilience amid economic uncertainty.

The latest inflation report presents a complex challenge for policymakers, as they balance the need to address inflationary pressures and support economic growth.

With the Fed expected to keep interest rates steady, economists are closely monitoring indicators to gain insights into future policy trends.

While the possibility of an interest rate cut next June remains on the table, uncertainties surrounding the dynamics of inflation and economic recovery remain.

Source: Al Jazeera + agencies