February Inflation Report: CPI Live Updates

Overall inflation is expected to hold steady at 3.1 percent on an annual basis. That’s down notably from a 9.1 percent high in 2022, but still quicker than the roughly 2 percent that was normal before the 2020 pandemic.

After stripping out volatile food and fuel costs for a better sense of the underlying trend, inflation is expected to moderate to 3.7 percent, down from 3.9 percent in January compared with a year earlier.

But how much that core measure climbed between January and February — on a monthly basis — will also be in focus. In particular, economists are likely to keep an eye on housing costs and other services’ prices in the measure. If they prove more stubborn than expected, it could be a sign that inflation will be more difficult to fully stamp out than policymakers have been hoping.

To date, inflation has come down steadily and relatively painlessly: Unemployment continues to hover below 4 percent and growth in 2023 was unexpectedly strong, even though the Fed has raised interest rates to a more than two-decade high.

Fed officials have been debating how long they need to leave rates at their current level, about 5.3 percent. Elevated borrowing costs make it expensive for people to buy a house or expand a business, and that can weigh on the economy over time. While the Fed has been trying to tamp down demand enough to bring inflation under control, officials want to avoid crushing growth to the point that it leads to widespread job losses or a recession.

But some economists have been worried that it could be harder to fully crush the remaining inflation than it has been to achieve the progress so far. And Fed officials want to avoid lowering interest rates too early, only to find out that inflation is not fully quashed.

“We don’t want to have a situation where it turns out that the six months of good inflation data we had last year didn’t turn out to be an accurate signal of where underlying inflation is,” Jerome H. Powell, the Fed chair, said while testifying before Congress last week. Given that, he said, the Fed is being careful.

But Mr. Powell also said last week that when the Fed was confident that inflation had come down enough, “and we’re not far from it,” then it would be appropriate to lower interest rates.

Omair Sharif, founder of Inflation Insights, said that inflation could prove to be slightly stickier at the start of 2024 than many forecasters had hoped, which vindicates the Fed’s decision to move carefully.

“It was never going to be a straight line down,” he said.