US Consumer Price Index fell 0.2% in Feb, matching estimates

Shoppers browse clothing at a JC Penney store in Queens, New York.
Michael Nagle | Bloomberg | Getty Images

Underlying U.S. inflation increased more than expected in February as rents and medical costs maintained their upward trend, which could keep the Federal Reserve on course to gradually raise interest rates this year.

The Labor Department said on Wednesday its Consumer Price Index (CPI), excluding the volatile food and energy components, increased 0.3 percent after a similar gain in January.

In the 12 months through February, the so-called core CPI rose 2.3 percent, the largest gain since May 2012, after increasing 2.2 percent in January.

Economists polled by Reuters had forecast the core CPI rising 0.2 percent last month and increasing 2.2 percent from a year ago.

The report came ahead of the conclusion of a two-day Fed meeting on Wednesday. The U.S. central bank is expected to leave interest rates unchanged. But with inflation stirring and the labor market continuing to tighten, economists believe the Fed will raise rates in June.

The Fed raised its benchmark overnight interest rate in December for the first time in nearly a decade.

Last month, the core CPI was boosted by a 0.3 percent increase in rents, which followed a similar gain in January.

Medical care costs rose 0.5 percent after advancing by the same margin in January. Prescription drug prices rose 0.9 percent, while the cost of hospital services increased 0.5 percent. There were also increases in the price of apparel, which rose 1.6 percent, the largest gain since February 2009.

Prices for new motor vehicles and used cars and trucks also rose.

But a 13 percent drop in gasoline prices, which offset both the increase in core CPI and a 0.2 percent gain in food prices, lead to the overall CPI falling 0.2 percent last month. The CPI was unchanged in January.

The drop resulted in the CPI increasing 1.0 percent in the 12 months through February, slowing after a 1.4 percent rise in January.