Data released for the month of February showed food inflation staggering in the negative growth rate. The surge is also higher as compared to the consumer inflation in January, recorded at 1.97 per cent. A Reuters poll of economists had predicted a growth of 2 per cent for January.
The Fed has a 2 per cent target for a separate inflation gauge from the Commerce Department that's linked to consumer spending.
Excluding the volatile food and energy components, the CPI edged up just 0.1 percent, the smallest increase since August 2018.
However, weakening fuel prices masked increases in the costs for food and shelter, medical care, according to the Labor Department report.
The January PCE price data will be released on March 19. But still, 2.57 percent far lesser than the 5.07 per cent recorded in the same month previous year. That index tends to run slightly below the Labour Department's CPI, and January figures are due March 29. The Fed is targeting 2% inflation.
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Even on a month-on-month basis, the Index of Industrial Production (IIP) declined during the month under review from December 2018 when it stood at 2.60 per cent.
USA 30-year bond yields were slightly down at 3.031 percent, from 3.032 percent on Monday.
The public's inflation expectations fell in February, according to the Federal Reserve Bank of New York's latest Survey of Consumer Expectations.
"With nothing in the outlook demanding an immediate policy response and particularly given muted inflation pressures, the [Federal Open Market] Committee has adopted a patient, wait-and-see approach to considering any adjustment in the stance of policy", Fed Chairman Jerome Powell said during a speech in Stanford, Calif., last week. Annual wage growth jumped 3.4% in February, the biggest increase since April 2009, from 3.1% in January.
Healthcare costs fell 0.2 per cent after five straight monthly increases. Prices fell for new (-0.2 m/m%) and used (-0.7% m/m) vehicles, prescription drugs (-1.0% m/m), and recreation (-0.4% m/m). Some might point to a softer core reading as a sign that pressures are ebbing, but a couple of the price declines look temporary, and we are not going to read too much into one-month's reading.
In contrast, output of consumer non-durables rose by 3.8 per cent and that of consumer durables by 1.8 per cent.