Inflation gauge shows price pressures easing gradually

A clearance sign is displayed at a retail clothing store in Downers Grove, Ill., Tuesday, March 12, 2024. On Friday, March 29, 2024, the government issues its latest monthly report on the Federal Reserve's preferred inflation gauge, a key measure of how well the Fed's drive to tame inflation is succeeding. (AP Photo/Nam Y. Huh)
A clearance sign is displayed at a retail clothing store in Downers Grove, Ill., Tuesday, March 12, 2024. On Friday, March 29, 2024, the government issues its latest monthly report on the Federal Reserve's preferred inflation gauge, a key measure of how well the Fed's drive to tame inflation is succeeding. (AP Photo/Nam Y. Huh)

WASHINGTON (AP) -- A measure of inflation that is closely tracked by the Federal Reserve slipped last month in a sign that price pressures continue to ease.

The government reported Friday that prices rose 0.3 percent from January to February, decelerating from a 0.4 percent increase the previous month in a potentially encouraging trend for President Joe Biden's re-election bid. Compared with 12 months earlier, though, prices rose 2.5 percent in February, up slightly from a 2.4 percent year-over-year gain in January.

Excluding volatile food and energy costs, last month's "core" prices suggested lower inflation pressures. These prices rose 0.3 percent from January to February, down from 0.5 percent the previous month. And core prices rose just 2.8 percent from 12 months earlier -- the lowest such figure in nearly three years -- down from 2.9 percent in January. Economists consider core prices to be a better gauge of the likely path of future inflation.

Friday's report showed that a sizable jump in energy prices -- up 2.3 percent -- boosted the overall prices of goods by 0.5 percent in February. By contrast, inflation in services -- a vast range of items ranging from hotel rooms and restaurant meals to healthcare and concert tickets -- slowed to a 0.3 percent increase, from a 0.6 percent rise in January.

The figures also revealed that consumers, whose purchases drive most of the nation's economic growth, surged 0.8 percent last month, up from a 0.2 percent gain in January. Some of that increase, though, reflected higher gasoline prices.

Annual inflation, as measured by the Fed's preferred gauge, tumbled in 2023 after having peaked at 7.1 percent in mid-2022. Supply chain bottlenecks eased, reducing the costs of materials, and an influx of job seekers made it easier for employers to keep a lid on wage growth, one of the drivers of inflation.

Still, inflation remains stubbornly above the Fed's 2 percent annual target, and opinion surveys have revealed public discontent that high prices are squeezing America's households despite a sharp pickup in average wages.

The acceleration of inflation began in the spring of 2021 as the economy roared back from the pandemic recession, overwhelming factories, ports and freight yards with orders. In March 2022, the Fed began raising its benchmark interest rate to try to slow borrowing and spending and cool inflation, eventually boosting its rate 11 times to a 23-year high. Those sharply higher rates worked as expected in helping tame inflation.

The jump in borrowing costs for companies and households was also expected, though, to cause widespread layoffs and tip the economy into a recession. That didn't happen. The economy has grown at a healthy annual rate of 2 percent or more for six straight quarters. Job growth has been solid. And the unemployment rate has remained below 4 percent for 25 straight months, the longest such streak since the 1960s.

The combination of easing inflation and sturdy growth and hiring has raised expectations that the Fed will achieve a difficult "soft landing" -- taming inflation without causing a recession. If inflation continues to ease, the Fed will likely begin cutting its key rate in the coming months. Rate cuts would, over time, lead to lower costs for home and auto loans, credit card borrowing and business loans. They might also aid Biden's re-election prospects.

photo Appliances are displayed in a Costco warehouse on Sunday, March 17, 2024, in Sheridan, Colo. On Friday, March 29, 2024, the government issues its latest monthly report on the Federal Reserve's preferred inflation gauge, a key measure of how well the Fed's drive to tame inflation is succeeding.(AP Photo/David Zalubowski)
photo New homes are shown under construction in Mount Prospect, Ill., Monday, March 18, 2024. On Friday, March 29, 2024, the government issues its latest monthly report on the Federal Reserve's preferred inflation gauge, a key measure of how well the Fed's drive to tame inflation is succeeding. (AP Photo/Nam Y. Huh)

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