Inflation continued its persistent rise in February—for the fifth straight month—according to a report released today by the Bureau of Labor Statistics. After falling for much of 2024, the Consumer Price Index (CPI)—one of the main measures of inflation—increased by 0.2% on a seasonally adjusted basis in February. The CPI also increased on a year-over-year basis, rising 2.8% over the past 12 months—a decrease from the 3% year-over-year inflationary rate from January. The inflation rate still eludes the Fed’s target rate of 2%.
The index for shelter increased by 0.3%, which accounted for nearly half of the monthly all items increase. The shelter index also rose by 4.2% on a yearly basis, though this represented a minor decline in rate from January’s reading (4.4%).
Realtor.com® Chief Economist Danielle Hale put the brakes on the positive sentiment when discussing the slowed inflation rate, issuing a reminder that tariffs may well be inflationary. She also weighed in on how this will affect the housing market:
“February Consumer Price Index (CPI) data increased at a more modest 0.2% after a 0.5% increase in January. The lower monthly pace helped annual inflation edge down to 2.8% from 3% in January. Nevertheless, against the backdrop of a trade war, markets are on edge about whether this progress will continue.
“Despite steady demand from households who find that the current financial scales in many markets are tipped in favor of renting, market asking rents have been relatively steady. Nevertheless, shelter inflation remains above its immediate pre-pandemic range, which averaged 3.3% (from 2017 – 2019) and continues to account for nearly half of the increase in overall inflation.”
Bright MLS Chief Economist Lisa Sturtevant echoed Hale’s sentiments in saying that years of sustained inflationary growth causes consumer angst and spills over into decisions made by the Federal Reserve.
“Although the overall inflation rate was lower in February, consumers are still feeling stressed by years of higher prices. With inflation where it is currently, it is a near certainty that the Federal Reserve will not cut the federal funds rate when they meet next week.”
The index for all items except food and energy—also known as core inflation—rose by 0.2%, after rising by 0.4% in January. Core inflation also rose 3.1% on a yearly basis, though this was a slight decline in the rate at which inflation grew, after it experienced a 3.3% rise for the 12 months ending in January 2025. This mirrored the pattern of the all items index and the shelter index.
Indices that saw a monthly rise as part of core inflation in February were medical care, used cars and trucks, household furnishings and operations, recreation, apparel and personal care. Indices experiencing a decline under this umbrella were airline fares and new vehicles.
Hale also made note of the fact that the slowed inflation rate was in contrast to last month’s higher than expected readout, though she also does not foresee movement from the Fed, quoting Chairman Jerome Powell directly.
“With recession worries rising, attention will be focused on this inflation reading, and today’s data offer a nice counter point to last month’s higher-than-expected figures. However, it is not enough of an outlier to change the general view that inflation is gradually slowing,” she said. “Underscoring that it takes several consistent readings to signal a shift, at a forum last Friday Chair Powell noted, ‘(W)e do not overreact to one or two readings that are higher or lower than anticipated.’”
Sturtevant also referenced the impact that impending tariffs will have on both the greater economy and the housing market in her remarks, while issuing a reminder that other metrics outside of inflation may be better indicators of where the housing market stands overall.
“With no Fed rate cut until at least the summer, the mortgage market has been reacting to economic data on the broader economy. It is widely believed that the Trump administration’s tariffs will raise prices, putting upward pressure on inflation and keeping rates elevated. However, at the same time, there are growing concerns that the economy is slowing. If the economy does cool, mortgage rates could fall.
“Although mortgage rates are a critical piece of the housing market puzzle, consumer confidence might be an even more important metric to watch. People are less likely to make big decisions, like buying or selling a home, when they feel uncertain about their financial situations. Consumer sentiment fell last month while consumer spending also moderated, indicating that many may be hesitating.”
