- CPI increased 0.2% for the first time since October, though YoY inflation held in negative territory at - 0.1%
- At 1.7% YoY, the pass - through to core remains limited as services remains the most relevant component
- Although core inflation will remain below the Fed’s target, we continue to expect the first rate hike i n September
Downward pressures on inflation are proving to be transitory, with the headline consumer price index up 0.2% in February following three consecutive months of declines. As expected, the rise in crude oil prices lifted the energy index 0.95% for the month, the first increase since June. However, annual inflation remains extremely low, at - 0.1% compared to 12 months ago. This marks the second consecutive month for negative YoY inflation and points to a prolonged period of slow price growth in the year ahead, even if headline CPI continues to increase on a monthly basis. That may even prove to be a difficult feat given that crude oil prices already declined again throughout the early part of March and have only recovered partially towards February’s highs.
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