US inflation held steady in February as economists expected, with prices rising 2.4% over the year, new consumer price index data showed.
CPI rose 0.3% over the month, matching the forecast and above the previous 0.2% increase.
Core CPI, which excludes volatile food and energy prices, rose 2.5% over the year, as expected and as it did in January. It rose 0.2% over the month, matching the forecast and cooler than the previous 0.3% increase.
The new consumer price index data doesn't reflect the oil shock due to the effective closure of the Strait of Hormuz, but economists expect the effects of the Iran War to show up in the next report.
Alexandra Wilson-Elizondo, global co-chief investment officer of multi-asset solutions at Goldman Sachs Asset Management, said data from the new report "was collected before the conflict in Iran sent crude oil surging roughly 30%, with natural gas, aluminum, fertilizer, freight rates, and shipping insurance moving higher with it."
"The Strait of Hormuz remains the wildcard, and if disruption is sustained, the inflation improvement embedded in today's print could reverse quickly," Wilson-Elizondo said in commentary.
The report gives a sense of how prices for key items were doing before the Iran war. Energy prices rose 0.5% year-over-year in February, with gas prices declining 5.6%. Food at home increased 2.4% year-over-year, and food away from home increased 3.9%.
Shelter prices rose 3% in February from a year ago. The year-over-year increase in apparel prices accelerated further, rising 2.5% in February compared to 1.7% in January.
The Federal Open Market Committee will meet next week to decide on interest rates for the second time this year. The Fed held rates steady in January, and experts and traders expect the same outcome this month.
"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," Skyler Weinand, chief investment officer at Regan Capital, said in commentary.
There's a nearly 100% chance of another Fed hold based on CME FedWatch, which shows market-based chances of the Fed's decision. Data published on Friday showed that an unexpectedly weak February jobs report didn't move the chances much. The US lost 92,000 jobs last month, with net losses of over 20,000 in the healthcare sector and leisure and hospitality.
Healthcare's decline was a reversal of its previous strength that had helped support the job market, and employment in the sector was lower because of a Kaiser Permanente strike.
"It's certainly a difficult time for job seekers right now because we are seeing that employers are just hiring a lot less than they did a couple years ago," Cory Stahle, an economist at the Indeed Hiring Lab, told Business Insider.
