Inflation rate rose by 2.8% in February, CPI report shows. Here’s what that means for price relief.

Inflation in February rose 2.8% on an annual basis, slightly lower than economists had forecast but continuing to signal that price hikes remain elevated despite the Federal Reserve’s efforts to tame inflation to a 2% annual rate. 

By the numbers

The Consumer Price Index was forecast to rise 2.9% last month, according to economists polled by financial data firm FactSet. The CPI, a basket of goods and services typically bought by consumers, tracks the change in those prices over time. 

February’s data comes after inflation accelerated in January, when it rose 3% on an annual basis
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What economists say

The report shows “further signs of progress on underlying inflation, with the pace of price increases moderating after January’s strong release,” said Kay Haigh, global co-head of fixed income and liquidity solutions in Goldman Sachs Asset Management.

Despite the lower-than-expected inflation, the Federal Reserve is still likely to hold off on cutting rates at its March 19 meeting, Haigh noted. “[The] combination of easing inflationary pressures and rising downside risks to growth suggest that the Fed is moving closer to continuing its easing cycle,” Haigh said.

Grocery prices are continuing to rise, with groceries increasing 2.6% in February from a year earlier, the CPI report said. The ongoing rise of food costs is creating a financial pinch for many households, economists note. 

Egg prices were a driver of last month’s grocery inflation, with the cost of eggs jumping 58.8% from a year earlier, the report said. Coffee rose 6% on an annual basis, while restaurant meals jumped 3.7% from a year ago.

Food inflation has been “gradually accelerating since mid-2024, reaching almost 5% on a 3-month annualized basis” in January, according to Morgan Stanley economists in a March 6 research note. 

Other items that saw price hikes in February include car insurance, which rose 11.1% on an annual basis, and medical care, which rose 3% from a year ago.
Meanwhile, President Trump’s tariff barrage has the potential to boost prices for many products, from food imports to automobiles, adding to an uncertain outlook for inflation, economists say. 

“Good news on inflation, but good news pre-tariffs,” said Robert Frick, corporate economist with Navy Federal Credit Union. “Unfortunately, three main pain points for consumer budgets — shelter, medical care and car insurance — had substantial increases.”

What it means for your money

Even though the inflation data came in lighter than expected, price increases are still pacing well above the Fed’s 2% annual goal. Because of that, economists say it’s unlikely the Fed will cut rates at its meeting next week. 

That means consumers and businesses will continue to face higher borrowing costs for longer, while still grappling with elevated price hikes, economists say.

“The Federal Reserve will remain firmly planted on the sidelines at next week’s meeting,” Bankrate Chief Financial Analyst Greg McBride said on Wednesday. “Inflation readings still need to show sustained progress toward 2%, and the recent economic uncertainty will make them ever more data-dependent in the coming weeks and months.”