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Inflation rose more than expected in February, with the consumer price index increasing by 0.4% in February and rising 3.2% over the last 12 months.
Core inflation, which excludes food and energy, rose 3.8% over the past 12 months and 0.4% compared to January, largely driven by shelter costs, according to Tuesday's Bureau of Labor Statistics CPI report.
The index for rent rose 0.5% month-over-month, while the index for owners' equivalent rent increased 0.4%. The CPI shelter index is up 5.7% over the past year, accounting for two-thirds of the total core inflation increase over that period, according to the BLS.
Despite the new inflation data, which came in slightly higher than economists' expectations, investors continue to price in interest rate cuts in the coming months, The Wall Street Journal reports.
But with shelter costs still driving inflation above the Federal Reserve's 2% goal, price increases could be stickier than previously thought.
Last month, asking rents across the U.S. experienced the largest gain since January 2023, with the median U.S. asking rent increasing 2.2% year-over-year to $1,981, according to a report by Redfin. That figure is also 0.9% higher than a month earlier.
In the Northeast, the median asking rent jumped 5.2% year-over-year to $2,481, the largest gain in nine months. In the Midwest, rents were up 4.9% to $1,441, similarly the largest increase in five months.
“Mortgage rates ticked back up in February — a disappointing development for prospective homebuyers, who just a few months ago got a glimmer of hope as rates finally started to fall,” Redfin Chief Economist Daryl Fairweather said in a statement. “With rates still elevated, many are opting to continue renting, which is buoying rental demand, and as a result, rent prices.”
The average 30-year mortgage rate is 6.88%, up from 6.62% at the start of the year, according to Freddie Mac data.
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