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By Scott McIntyre, CFA
Co-Head of Investment Management
HilltopSecurities Asset Management
This morning’s release of the Consumer Price Index (CPI) indicated the pace of inflation held at a moderate level, with headline CPI rising +0.3% in February and +2.4% year over year, matching both median forecasts. Shelter costs, making up over a third of the overall index, continued to ease, increasing just +0.2% in February and +3.0% for the year.
Overall energy prices rose +0.6% in February, with gasoline up +0.8%. By contrast, pump prices were down -3.2% in January. Food prices continued to climb, up +0.4% for the month and +3.1% year over year. The optics of rising food and pump prices, which affect most Americans, make inflation feel worse than the report suggests.
On an annual basis, core CPI, which excludes food and energy, rose a modest +0.2% last month after a +0.3% January gain. The annual core pace held steady at +2.5%, equaling the slowest core pace since 2021.
Core goods prices were up +0.1% with cost of new cars unchanged and used cars down -0.4%. Core services prices slowed from +0.4% to +0.3%, driven largely by benign residential rents (+0.1%). Supercore services, which excludes housing, rose by just +0.35% in February after a +0.59% January gain.
Notable category increases last month were found in rental cars (+2.7%), airfares (+1.4%), lodging away from home (+1.0%) and medical care services (+0.6%). There were notable declines in health insurance (-1.1%), prescription drugs (-0.2%) and vehicle insurance (-0.3%).
However, the inflation story has evolved considerably since the survey was taken. February CPI data captures the period before the Iran war pushed crude prices sharply higher. Early March data shows gasoline spiking by nearly 20%. Thus, energy driven cost pressures are poised to halt the disinflation progress that had asserted itself over the prior three months. CPI will be higher in March and April. Whether the rise in prices continues into summer will depend on how the war unfolds.
Today’s release might normally have granted Fed officials the latitude to ease rates in the coming months, but expected energy pressure resulting from the evolving conflict will keep the Fed on hold longer.
Bond yields are higher in early trading in response to a rise in crude oil prices. Stocks are mixed.
About Scott McIntyre, CFA
As HilltopSecurities Asset Management’s Co-Head of Investment Management, Scott McIntyre specializes in investment management services and is responsible for the management, oversight and trade supervision of more than $30 billion in institutional fixed income assets for HilltopSecurities’ public sector municipal clients. Scott also provides investment advice and consulting, reviews local government investment policies, formulates overall investment strategies, evaluates account performance and oversees the day-to-day operations. He is a member of the Chartered Financial Analyst (CFA) Institute and a CFA Charterholder, a two-term advisor to the GFOA Treasury and Investment Management (TIM) committee, a Registered Investment Advisor, and holds FINRA Series 7, 24, 63, and 65 licenses.
About Greg Warner, CTP
As HilltopSecurities Asset Management’s Co-Head of Investment Management, Greg Warner specializes in investment management services and is responsible for the management and oversight of more than $30 billion in institutional fixed income assets for HilltopSecurities’ public sector municipal clients. Greg coordinates all client services and portfolio management duties, including security evaluation and portfolio analysis, trading, investment reporting, board presentations, and monitoring of broker-dealer relationships. He is an advisory committee member to the Texas Association of Counties, a member of the Government Treasurers’ Organization of Texas (GTOT), a Registered Investment Advisor, a Certified Treasury Professional (CTP) and holds FINRA Series 7, 63, and 65 licenses.
About Matt Harris, CFA
As HilltopSecurities Asset Management’s Senior Portfolio Advisor, Matt Harris specializes in investment management services for public sector municipal clients. He developed his experience in the banking industry, supporting balance sheet management, interest rate risk analysis, liquidity planning, and investment strategy implementation. At HilltopSecurities, he works closely with clients to develop and implement customized investment strategies, oversees account documentation and reporting, and assists clients with the public funds depository review process, including competitive RFP evaluations. Harris is a member of the CFA Institute and a CFA Charterholder, a Registered Investment Advisor, and holds FINRA Series 7, 63, and 66 licenses.
The paper/commentary was prepared by HilltopSecurities (HTS). It is intended for informational purposes only and does not constitute legal or investment advice, nor is it an offer or a solicitation of an offer to buy or sell any investment or other specific product. Information provided in this paper was obtained from sources that are believed to be reliable; however, it is not guaranteed to be correct, complete, or current, and is not intended to imply or establish standards of care applicable to any attorney or advisor in any particular circumstances. The statements within constitute the views of HTS as of the date of the document and may differ from the views of other divisions/departments of Hilltop Securities Inc. and its affiliates. In addition, the views are subject to change without notice. This paper represents historical information only and is not an indication of future performance. This material has not been prepared in accordance with the guidelines or requirements to promote investment research, it is not a research report and is not intended as such. Sources available upon request.
Hilltop Securities Inc. is a registered broker-dealer, registered investment adviser and municipal advisor firm that does not provide tax or legal advice. HTS is a wholly owned subsidiary of Hilltop Holdings, Inc. (NYSE: HTH) located at 717 N. Harwood St., Suite 3400, Dallas, Texas 75201, (214) 859-1800, 833-4HILLTOP.