The Consumer Price Index (CPI) increased by 0.2% in February month-on-month, below economists’ expectations of 0.3% uptick and slower than January’s 0.5% rise, according to data released by the U.S. Bureau of Labor Statistics.
Headline annual inflation eased to 2.8% from 3.0% in the prior month.
Key Points:
- Headline CPI fell from 2.8% to 3.8% year-on-year, as the monthly print showed a 0.2% uptick versus the projected 0.3% gain
- Core inflation (excluding food and energy) rose 0.2% month-over-month, below the 0.3% consensus forecast, bringing annual rate down from 3.3% to 3.1%
- Shelter costs increased 0.3%, accounting for nearly half of the monthly CPI increase
- Airline fares plunged 4.0%, significantly contributing to the softer headline figure
- Gasoline prices decreased 1.0%, but overall energy index rose 0.2% due to increases in electricity and natural gas
Link to official U.S. CPI Report (February 2025)
The February report showed moderation across several key components. Shelter inflation, which has been a persistent driver of overall inflation, increased at a more modest pace of 0.3%. A key contributor to weaker than expected readings was the 4% slump in airline fares.
Food prices rose 0.2% in February, with food away from home increasing 0.4% while food at home remained unchanged. Within the food category, there were notable increases in meat prices, with beef rising 2.4% and eggs surging 10.4%.
Market Reaction
U.S. Dollar vs. Major Currencies: 5-min
Overlay of USD vs. Major Currencies Chart by TradingView
The U.S. dollar initially weakened against most major currencies following the report’s softer than expected results, as traders increased bets on potential Federal Reserve rate cuts later this year.
USD/CAD experienced the most notable decline, dropping 0.39%, while USD/GBP fell 0.33%. The New Zealand and Australian dollars also strengthened against the greenback, with USD/NZD and USD/AUD falling 0.24% and 0.27% respectively.
Interestingly, USD quickly recovered from its post-CPI dip and even maintained strength against safe-haven rivals CHF and JPY, with USD/JPY even rebounding past its pre-CPI levels less than an hour after the release. The dollar bounced higher versus EUR almost immediately after the report, although a broader-based selloff followed a few hours later when the market spotlight returned to trade tensions.
