CPI: Inflation stays in check, despite high gas prices

@CNNMoney March 16, 2012: 10:15 AM ET

NEW YORK (CNNMoney) -- Gas prices keep rising, but that hasn't led to higher prices for other consumer goods just yet.

The government's key measure of inflation, the Consumer Price Index, showed prices rose 0.4% in February, the most since last April and in line with economists' expectations.

After stripping out volatile energy and food prices, core inflation was up only 0.1% in the month.

The ideal inflation rate, at least according to the Federal Reserve, is around 2% a year. Compared to last year, the CPI is up 2.9%, but core inflation is up only 2.2%.

On Tuesday, the Federal Reserve said higher gas prices are likely to drive inflation higher but only temporarily.

That's because the economy still has a lot of room to grow. Although the job market has started to improve recently, 12.8 million people remain unemployed. Meanwhile, home prices are at their lowest levels since 2002.

Should the job market continue to improve, that could change. More jobs and higher wages could lead to higher rents -- one of the largest components of core inflation.

"As the economy recovers and the unemployment rate comes down, households generate more income," said Carl Riccadonna, senior U.S. economist with Deutsche Bank. "Then you tend to see people upgrade their housing or if they're living with mom and dad, perhaps they move out on their own. Rental inflation could push the index higher."

Higher wages could also give businesses more leeway to raise prices on recreational and entertainment goods and services. For those reasons, Riccadonna expects to see core inflation keep rising to around 2.7% by year-end.

Check gas prices in your state

As of February though, rising prices were largely confined to the gas station.

Gas prices rose about 29 cents per gallon in February, ending the month at a national average of $3.731, according to AAA's Daily Fuel Gauge report.

According to the CPI figures, food prices were completely flat in the month. To top of page

Overnight Avg Rate Latest Change Last Week
30 yr fixed3.80%3.88%
15 yr fixed3.20%3.23%
5/1 ARM3.84%3.88%
30 yr refi3.82%3.93%
15 yr refi3.20%3.23%
Rate data provided
by Bankrate.com
View rates in your area
Find personalized rates:
Economic Calendar
Latest ReportNext Update
Home pricesAug 28
Consumer confidenceAug 28
GDPAug 29
Manufacturing (ISM)Sept 4
JobsSept 7
Inflation (CPI)Sept 14
Retail sales Sept 14
  • -->

    Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.