Consumer Price Index: February Headline At 2.2%

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US inflation rose modestly in February, with the core consumer price index (CPI) 1.8 percent higher than in the same month a year ago, signaling the Federal Reserve will raise interest rates gradually.

USA consumer inflation rose more slowly in February, cooling from January's sudden jump, with steady gains in clothing prices and rent, the government reported Tuesday.

Excluding food and fuel prices, which can see big swings, the index also gained 0.2 per cent for the month, with noted gains in the prices for vehicle insurance, rent and apparel.

A report released by the Labor Department on Tuesday showed consumer prices in the United States increased in line with economist estimates in the month of February. A weakening dollar and fiscal stimulus in the form of a $1.5 trillion tax cut package and increased government spending are also seen spurring inflation.

The Federal Reserve is expected to raise its benchmark interest rates next week in the first of at least three hikes expected this year - but market watchers are looking for signs the central bank could act more assertively.

At this point, according to Piegza, a March rate hike is priced into the market, as it has been since Fed Chair Yellen's press conference back in December of past year.

Prices for women's and girls' apparel increased 1.5% in February, while men's and boys' clothing prices were up 1.7%. Policymakers consider the labor market to be near or a little beyond full employment.

The CPI had risen 0.5% in January, its biggest gain in four years.

USA wholesale prices rose 0.2 percent in February as a pickup in services prices offset a drop in the cost of food and energy.

The Commerce Department reported Wednesday that retail sales slipped 0.1% last month, while January's performance was revised upward to a 0.1% drop from a 0.3% decline. The NFIB survey also showed almost a third of owners reported raising compensation to retain or attract workers last month, the largest share in more than 17 years. Its positive correlation with the core CPI suggests that this measure would remain below the Fed's 2.0% inflation target when the February numbers are released.

The core CPI was restrained by a moderation in rents.

"For now, we are comfortable with our view for three [interest rate] hikes this year".

The inflation-adjusted hourly rate of pay reported growth of 0.4% yoy against a 0.7% rise in January. In contrast, the indexes for communication, new vehicles, medical care, and used cars and trucks declined over the month.

Apparel prices continued to march higher, rising 1.5 percent in February after surging 1.7 percent in January. The cost of airline fares rebounded after falling in February.

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