The numbers: The cost of U.S. goods and services rose by a milder 0.3% in February, perhaps a sign the Federal Reserve’s fight against high inflation is starting to show a bit more progress. Prices had risen by a sharp 0.6% in January, based on the so-called PCE index.
The yearly increase in prices declined to 5% from 5.3% in the prior month, the government said Friday, marking the lowest level in more than a year and a half. That’s about three times the rate of inflation before the pandemic, however. Senior Federal Reserve officials have signaled they plan to raise interest rates just once more before pausing to determine how much a sharp increase in borrowing costs brings down inflation. The Fed has jacked up a key short-term U.S. rate to a top end of 5%, a remarkably fast acceleration from nearly zero one year ago. Higher rates temper inflation by slowing the economy, but the effects can sometimes take up to a year or more to be fully felt. The Fed wants to avoid going too far or cause any more stress on the U.S. financial system after the failure of Silicon Valley Bank. Key detail …