US Core CPI Tumbles To Slowest In 4 Years (Before Iran-Triggered Oil Spike)

While all attention is currently on Iran (and the energy impact of actions overseas), today’s CPI (for February) should not be affected by the recent surge in WTI (but March’s data definitely will be)…

Source: Bloomberg

Headline CPI rose 0.3% MoM (as expected), lifting prices by 2.4% YoY (unchanged from the prior month at the lowest since May 2025)…

Source: Bloomberg

The disinflation trend is still your friend as the terrors of tariff-flation remain non-evident, much to the disappointment of establishment economists.

Core Services remain the biggest driver of CPI with Core Goods relatvely unmoved (and Energy starting to pick up)…

CPI rose 0.3% MoM after rising 0.2% MoM in January, and in line with estimates. Over the last 12 months, CPI rose 2.4%, also in line with estimates and unchanged from January.

• The index for shelter rose 0.2 percent in February and was the largest factor in the all items monthly increase. The food index increased 0.4% over the month as did the food at home index, while the food away from home index rose 0.3% . The index for energy also increased in February, rising 0.6 percent.

Core CPI also met expectations with a +0.2% MoM move, leaving prices up 2.45% YoY – the lowest since March 2021

Source: Bloomberg

Core CPI Services are also the main driver of Core CPI (but are seeing significant disinflation)…

Core CPI rose 0.2% MoM in February; Over the last 12 months, core CPI rose 2.5%, also in line with estimates and unchanged from January.

• Indexes that increased over the month include medical care, apparel, household furnishings and operations, airline fares, and education. Conversely, the indexes for communication, used cars and trucks, motor vehicle insurance, and personal care were among the major indexes that decreased in February.

• The energy index increased 0.5% for the 12 months ending February. The food index increased 3.1% over the last year.

Some more details on the core print

• The index for all items less food and energy rose 0.2% in February, following a 0.3% increase in January.

  • The shelter index increased 0.2% over the month as did the owners’ equivalent rent index.

  • The index for rent increased 0.1% in February, the smallest 1-month increase in that index since January 2021.

• The lodging away from home index rose 1.0% over the month. The medical care index increased 0.5% in February, after rising 0.3% in January.

• The index for hospital services increased 0.6% over the month and the index for physicians’ services rose 0.3%.

  • Conversely, the prescription drugs index decreased 0.2% in February

• The index for apparel increased 1.3% over the month, after rising 0.3% in January. The household furnishings and operations index rose 0.3% in February and the airline fares index rose 1.4%.

• The index for education rose 0.2% over the month.

• The new vehicles index was unchanged in February.

• The communication index declined 0.5% in February and the used cars and trucks index decreased 0.4% over the month.

• The index for motor vehicle insurance decreased 0.3% in February and the index for personal care fell 0.2%

SuperCore CPI (Services ex-Shelter) lifted very modestly on a YoY basis with Medical Care Services the biggest driver…

While typically, a hot (or cold) CPI would drive stocks and bonds dramatically, we remain beholden to the slings and arrows of outrageous crude oil price fortune (for now) with rate-cut odds remaining near recent (hawkish) cycle lows.

Interestingly Fuel Oil costs soared MoM…

Both Goods and Services costs are signaling disinflation (ahead of March’s potentially explosive moves)…

The question is – how long will the impact of soaring energy costs impact CPI?

Is it different this time?

The policy sensitive two-year yield was around 1.5 basis points higher at 3.605% after the report, while swaps linked to Fed meeting dates implied traders see 34 basis points of easing this year, versus around 35 basis points earlier in the session. The market continues to price the first full quarter-point reduction arriving in September or October.

Longer-dated Treasuries were under more pressure, with the yield on 10-year notes two basis points higher at 4.18%. Later in New York, Treasury will sell $39 billion of the current 10-year issue.