February CPI preview: Disinflation progress looks to be stalling again

The February CPI is likely to show that progress on lowering inflation is stalling out again. We estimate headline CPI rose 0.21% last month. That would be a few basis points stronger than January's 0.17% increase and would keep the year-over-year rate a tick above its cycle low of 2.3%.

Although the conflict in the Middle East started over the weekend, oil and gasoline prices were already rising last month in anticipation of an escalation. We estimate gasoline prices rose 0.8% in February, with a slightly smaller increase (+0.6%) in energy services.

We expect prices for food at home to fall 0.1% in February, providing some relief to consumers amid the strengthening in energy inflation. The January Producer Price Index for consumer foods posted its largest monthly decline since last March, and data from Truflation also show food inflation cooling rapidly. We look for the softer trend in grocery prices to continue in the coming months amid lower agricultural commodity prices and slowing wage costs at grocery stores. Weaker input cost growth should help limit food away from home inflation to a ~0.25% increase, which would be below the 0.33% monthly average increase registered in 2025.

We expect core CPI to advance 0.19% in February, softer than January's 0.30% rise. Services should lead the moderation. We project primary shelter inflation to rise roughly in line with January's 0.23% increase, but softer price growth in travel-related services and medical care likely will weigh on core services inflation. Hotel occupancy and air traveler throughput tracked their seasonal norms in February, leaving room for payback after two months of outsized gains. Professional medical services and hospital services prices rose well above their recent trends in January and thus are ripe for some mean reversion.

Core goods inflation likely strengthened in February. We look for the pickup to be driven primarily by a rise in used autos prices after a firming in wholesale auction prices around the end of last year. Excluding autos, we look for core goods prices to increase 0.17%, which would be weaker than in January but still slightly above the 2025 average as tariff costs continue to filter through to consumer prices. The staggered pass through of tariff-related costs and firming in transportation costs are expected to keep goods prices advancing faster than their pre-pandemic pace.

The CPI has shown a noticeably more benign inflation environment than the PCE delator in recent months. Unusually, the year-over-year rate of core CPI is running 0.4 percentage points below the core PCE. Much of the divergence is coming from financial services, which carries a significantly larger weight in the core PCE (6% vs. 0.3%) and is largely imputed. Differences in scope and weighting of healthcare services and some core goods items are also leading to core PCE outpacing the core CPI inflation at present. We anticipate the gap to close in the coming months by core PCE slowing and core CPI edging up slightly, but for the combined message to be that inflation remains stuck closer to 3% than the Fed's 2% target.

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