Market watchers and consumers will soon get fresh data on how much inflation shifted in February.
The Bureau of Labor Statistics’ Consumer Price Index report, due out Wednesday morning, is forecast to show little change from January’s cooler-than-expected print. Economists surveyed by Bloomberg anticipate a 0.3% monthly rise in consumer prices and annual inflation remaining flat at 2.4%. On a “core” basis, excluding volatile energy and food categories, economists expect a monthly increase of 0.2% and a yearly boost of 2.5%.
But those predictions come with a big caveat: The report covers the period before the war with Iran broke out, which is raising gas prices and fueling concerns of higher utility bills.
“Perhaps more important than the [February] data is the evolving risk space for inflation,” Bank of America’s Stephen Juneau said in a research report last week.
“The ongoing US-Israel military operation in Iran has driven oil prices up by close to 18% from end-Feb,” Juneau continued. “While our base case is for the conflict to be short-lived, a longer conflict would likely lead to a more sustained increase in oil. That would put upward pressure on headline, core inflation and inflation expectations in the months ahead.”
Read more: How oil price shocks ripple through your wallet, from gas to groceries
Other concerns about the pace of price increases remain.
The Federal Reserve’s preferred gauge of inflation — the Personal Consumption Expenditures index, which includes spending on behalf of consumers for things like employer-based health insurance — ran a bit hotter than expected in December, posting a 2.9% annual increase. That’s well above the Federal Reserve’s target of 2%, and economists see that pace holding in January’s data, set for release Friday.
Meanwhile, the labor market also appears to be on shaky ground after unexpectedly losing 92,000 positions last month, pushing the unemployment rate up to 4.4%. That’s further complicating the Federal Reserve’s rate deliberations as policymakers weigh higher oil prices and inflation amid conflict with Iran, coupled with a soft job market.
“This week’s US inflation releases (CPI for February and PCE for January) arrive at a delicate moment for markets,” Capital analyst Daniela Hathorn wrote in a client note. “On the surface, these prints are backward-looking. Yet in the current environment of rising energy prices, heightened geopolitical tensions and signs of labour-market softening, they are unlikely to be dismissed as ‘out of date.'”