Key takeaways

  • While the slightly stronger February Consumer Price Index (CPI) report was unwelcome news for the Federal Reserve, underlying components still indicate a promising trend in inflation, and the report was largely in line with expectations.
  • However, February’s stronger year-over-year (YoY) rise in the headline CPI suggests the path to the Fed’s 2% target could be longer and bumpier than expected, as the labor market and economic growth remain too strong, elevating prices.
  • We don’t expect February’s CPI report to alter the Fed’s plans to keep interest rates higher for longer to slow inflation, but we do believe the Fed needs to see more compelling evidence that inflation is slowing in upcoming data releases before beginning to cut interest rates.


John Veit

The February 2024 Consumer Price Index for All Urban Consumers (CPI-U) report marked a second consecutive 0.4% month-over-month (MoM) increase in February, following a 0.3% rise in January. On a year-over-year (YoY) basis, inflation rose by 3.2% in February, a slight uptick from the 3.1% YoY rise in January.1 While the slightly stronger February CPI report was unwelcome news for the Federal Reserve, underlying components still indicate a promising trend in inflation, and the report was largely in line with expectations.

CPI prints play a key role in the Fed’s interest rate decisions as it continues its goal to lower inflation to its 2% target. We don’t expect February’s CPI print to alter the Fed’s plans to keep rates higher for longer until inflation materially lowers. The Fed needs to see more compelling evidence that inflation is nearing 2% before beginning rate cuts.

Report highlights

February’s stronger YoY rise in the headline CPI suggests the path to the Fed’s 2% target could be longer and bumpier than expected, as the labor market and economic growth remain too strong, elevating prices. On a positive note, food prices were unchanged in February, following a 0.4% MoM increase in January. Food at and away from home were also unchanged in February.

However, these prices were offset by a sharp 3.8% MoM rebound in gasoline prices in February, following declines the prior two months.2 Although energy prices are volatile, February’s rebound could suggest disinflation from declining energy prices may be close to an end. We expect energy prices will keep headline inflation data elevated in the near term and weigh on the consumer by diminishing purchasing power.

Core CPI (excluding food and energy) rose by 0.4% MoM again in February and a slightly softer 3.8% YoY.3 The increase in the core CPI was driven by robust gains in owner’s equivalent rent and medical care services prices. We expect that core inflation will moderate this year as the economy and labor market soften; however, it will likely take longer to reach the Fed’s goal as services inflation remains sticky.

Core services inflation also remains on the stickier side of inflation, which the Fed is laser-focused on slowing. Core services inflation fell to 0.5% MoM in February, weighed down by a softer 0.4% MoM rise in the shelter component. There was a slight uptick to 0.5% MoM in rent of primary residence inflation and a more muted 0.4% MoM rise in owner’s equivalent rent.4

While the shelter component slightly moderated, it remains the main driver of core services inflation and accounts for one third of the overall CPI. Shelter prices need to decline for headline inflation to materially weaken. Although changes in housing prices have a lagged effect on the housing component of the CPI basket, we expect rental prices to soften this year.

Core goods prices increased 0.1% MoM in February, following a 0.3% MoM decline in January. This rise was driven by a 0.1% MoM rise in used vehicles prices, which offset the 3.4% MoM decline in January, and a 0.6% MoM rise in apparel prices, which offset a 0.7% MoM decline the prior month.5 We expect the price of goods to moderate in upcoming quarters as consumer demand further weakens due to high interest rates and tighter monetary policy.

The Fed remains focused on its new preferred measure of inflation, core services inflation (excluding housing), which rose by 0.5% MoM in February, following a 0.9% MoM rise in January. February’s gain is more than twice the pre-pandemic pace and remains too strong for the Fed. Largely driven by the domestic economy, this indicator indicates economic growth is still too high for inflation to return to the Fed’s 2% inflation target.

Bar and line chart showing U.S. CPI year-over-year changes from February 2020 to February 2024.

Possible implications for the Fed

We don’t expect February’s CPI report to alter the Fed’s plans to keep interest rates higher for longer to slow inflation. February’s CPI report showed inflationary pressures are continuing to ease, especially compared to the 6% YoY headline inflation rate in February 2023.6 However, it will take time to reach the Fed’s 2% inflation target.

Energy and shelter inflation need to fall significantly lower. That said, we expect many disinflationary pressures to feed through and bring down inflation this year, especially given the decline in unit labor cost growth to its pre-pandemic rate. These factors will play a key role in determining the Fed’s monetary policy decisions in 2024, which will be critical in shaping the economic outlook for both consumers and markets.

On March 7 at Fed Chair Jerome Powell’s semi-annual monetary policy testimony, Powell indicated that the Federal Markets Committee (FOMC) will consider cutting rates at some point later this year and will continue its data-dependent approach. February’s inflation report provides some evidence that inflation is trending in the right direction, but it might not be enough to convince the Fed to lower interest rates anytime soon.

The bottom line

We still expect the Fed to begin cutting interest rates later in the year. At the most recent FOMC meeting in January, the Fed suggested it would likely cut rates three times if inflation and economic growth continue to moderate. For more information on how this economic data may impact your investment strategy, consult a financial advisor.



U.S. Bureau of Labor Statistics (BLS), “Consumer Price Index Summary.” (March 2024)










BLS, “Consumer Price Index Summary.” (March 2024).

Connect with a Wealth Advisor

Our Wealth Advisors begin by getting to know you personally. To get started, tell us about your needs and we’ll reach out to you.

Connect now



This material is for informational purposes only, and may inform you of certain products and services offered by J.P. Morgan’s wealth management businesses, part of JPMorgan Chase & Co. (“JPM”). Products and services described, as well as associated fees, charges and interest rates, are subject to change in accordance with the applicable account agreements and may differ among geographic locations. Not all products and services are offered at all locations. If you are a person with a disability and need additional support accessing this material, please contact your J.P. Morgan team or email us at for assistance. Please read all Important Information.

Any views, strategies or products discussed in this material may not be appropriate for all individuals and are subject to risks. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. Asset allocation/diversification does not guarantee a profit or protect against loss. Nothing in this material should be relied upon in isolation for the purpose of making an investment decision. You are urged to consider carefully whether the services, products, asset classes (e.g. equities, fixed income, alternative investments, commodities, etc.) or strategies discussed are suitable to your needs. You must also consider the objectives, risks, charges, and expenses associated with an investment service, product or strategy prior to making an investment decision. For this and more complete information, including discussion of your goals/situation, contact your J.P. Morgan representative.

NON-RELIANCECertain information contained in this material is believed to be reliable; however, JPM does not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. No representation or warranty should be made with regard to any computations, graphs, tables, diagrams or commentary in this material, which are provided for illustration/reference purposes only. The views, opinions, estimates and strategies expressed in this material constitute our judgment based on current market conditions and are subject to change without notice. JPM assumes no duty to update any information in this material in the event that such information changes. Views, opinions, estimates and strategies expressed herein may differ from those expressed by other areas of JPM, views expressed for other purposes or in other contexts, and this material should not be regarded as a research report. Any projected results and risks are based solely on hypothetical examples cited, and actual results and risks will vary depending on specific circumstances. Forward-looking statements should not be considered as guarantees or predictions of future events.

Nothing in this document shall be construed as giving rise to any duty of care owed to, or advisory relationship with, you or any third party. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting, legal, tax or other) given by J.P. Morgan and/or its officers or employees, irrespective of whether or not such communication was given at your request. J.P. Morgan and its affiliates and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transactions.

Legal Entity and Regulatory Information.

J.P. Morgan Wealth Management is a business of JPMorgan Chase & Co., which offers investment products and services through J.P. Morgan Securities LLC (JPMS), a registered broker-dealer and investment adviser, member FINRA and SIPC. Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. Certain custody and other services are provided by JPMorgan Chase Bank, N.A. (JPMCB). JPMS, CIA and JPMCB are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.

Bank deposit accounts and related services, such as checking, savings and bank lending, are offered by JPMorgan Chase Bank, N.A. Member FDIC.

This document may provide information about the brokerage and investment advisory services provided by J.P. Morgan Securities LLC (“JPMS”). The agreements entered into with JPMS, and corresponding disclosures provided with respect to the different products and services provided by JPMS (including our Form ADV disclosure brochure, if and when applicable), contain important information about the capacity in which we will be acting. You should read them all carefully. We encourage clients to speak to their JPMS representative regarding the nature of the products and services and to ask any questions they may have about the difference between brokerage and investment advisory services, including the obligation to disclose conflicts of interests and to act in the best interests of our clients.

J.P. Morgan may hold a position for itself or our other clients which may not be consistent with the information, opinions, estimates, investment strategies or views expressed in this document.  JPMorgan Chase & Co. or its affiliates may hold a position or act as market maker in the financial instruments of any issuer discussed herein or act as an underwriter, placement agent, advisor or lender to such issuer.