Inflation Picks Up to 3.2%, Slightly Hotter Than Expected

U.S. inflation was slightly stronger than expected last month but did little to change expectations that the Federal Reserve will begin cutting rates later this year.

Consumer prices rose 3.2% in February from a year earlier, the Labor Department said Tuesday, up slightly from economists’ expectations of 3.1%.

The second straight month of firmer-than-expected inflation is likely to reinforce the central bank’s wait-and-see posture toward rate reductions when officials meet next week. Still, officials are focused on when to cut rates rather than whether to raise them again. Inflation has declined notably from 40-year highs following the most rapid interval of rate increases in four decades.

Stocks ticked slightly higher in morning trading.

Core prices, which exclude food and energy items in an effort to better track inflation’s underlying trend, rose 0.4% from January—more than the 0.3% economists expected. Core prices were up 3.8% from a year earlier, and while that marked the smallest increase since 2021, the report dashed hopes that stronger-than-expected inflation in January was a mere blip.

The report showed prices for energy goods rose 3.6% from a month earlier, a reflection of the rise in gasoline prices last month. Prices for food were unchanged. Prices for other goods rose 0.1%, and were down 0.3% from a year earlier.

Consumer-price index, change from a year earlierSource: Labor DepartmentNote: Core excludes food and energy prices.