March 14 (UPI) -- Consumer-level inflation moderated somewhat in February, U.S. federal data from Tuesday show, but it remains elevated at 6% over the last 12 months, well above the target rate for policymakers.
Data from the Commerce Department showed the pace of inflation for all consumer goods increased by 0.4% from January, moderating from the 0.5% increase seen from December.
The cost for a place to live was the largest contributor to consumer-level inflation, rising from 0.7% from December to January to 0.8% month-on-month to February. Year-on-year, the shelter component of the Consumer Price Index is up 8.1%.
That's likely a reflection of higher lending rates. Joel Kan, the deputy chief economist at the Mortgage Bankers Association, said this is the time of year when buying usually increases, but higher lending rates have throttled any momentum.
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"The increase in mortgage rates has put many homebuyers back on the sidelines once again, especially first-time homebuyers who are most sensitive to affordability challenges and the impact of higher rates," Kan said.
Food, meanwhile, remains expensive, with grocery bills topping what it costs to go out to eat. While prices there are moderating as well, food at home is still 10.2% more expensive than it was a year ago.
Energy prices moved from a 2% increase month-on-month in January to a 0.6% decline in February. Home heating fuels are holding steady and West Texas Intermediate, the U.S. benchmark for the price of oil, is down from $80.47 per barrel from the start of the year to $77 at the end of February.
WTI was trading closer to $73 per barrel on Tuesday, following a dramatic sell-off that greeted the collapse of Silicon Valley Bank last week.
Year-on-year inflation is still running at nearly three times the rate of the target level for officials at the U.S. Federal Reserve, who meet next week to consider their next move in the fight against consumer-level inflation.
The failure of SVB, and New York's Signature Bank, was partially the result of aggressive rate hikes from the Fed. When rates increase, the yield on bonds declines, leaving banks scrambling to back deposits. Too much too fast and too soon, as in the case of SVB, leads to a run on deposits.
"As I've long said, and as challenges in the banking sector remind us, there will be setbacks along the way in our transition to steady and stable growth," President Joe Biden said. "But we face these challenges from a position of strength."
That will be a paramount concern for policymakers next week. Up until now, it was largely expected the U.S. central bank would raise interest rates by 0.5%, up from the previous hike of 0.25%, because of better-than-expected data on U.S. economic trajectory.
"We don't see the need to hike rates," said James Knightly, the chief international economist at investment bank ING. "The tightening of lending conditions that will inevitably result from the fallout of the past few days heightens the risk of a hard economic landing and inflation returning to target by early next year."
Stripping away food and energy to come up with the Fed's preferred metric, inflation is up 5.5% over the last 12 months, the smallest annual increase since December 2021.
