The cost of consumer goods and services in the U.S. accelerated last month as an increase of government stimulus brought new concerns over runaway growth and inflation.
The CPI increased 0.4% in February, according to data published by the Labor Department yesterday, or up 1.7% on a yearly basis. That is compared to a 0.3% uptick in January, and a 1.4% increase on a yearly basis.
It marked the largest annual gain within a year, although inflation stayed well-below pre-covid levels at 1.7%.
Inflation fears, which are in part due to a rise in Treasury bond yields, have shook Wall Street recently, with some investors being worried it could cause the Federal Reserve to tighten monetary policy sooner than expected.
The Fed likes to see inflation around 2%, although it had a new strategy over the summer to keep the benchmark federal funds rate close to zero, even if inflation goes above the preferred rate. Chairman Powell acknowledged during a WSJ conference that officials expect a “transitory increase in inflation,” but said he thinks the central bank will be patient.
“We watch a large range of conditions and we believe we are far from our goals,” Powell stated. “I would be worried about tightening in financial conditions and disorder that might damage the potential achievement of our goals.”