Real Impact: What the February Consumer Price Index Report Means for Rental Housing

What Happened

Consumer prices rose 0.2% in February and 2.8% year-over-year, according to Wednesday’s data release by the Bureau of Labor Statistics. With Wall Street initially bracing for a slightly higher 0.3% uptick in prices this month, the marginally more positive numbers offer some relief to markets mired in volatility this week. Core CPI, which includes all items minus food and energy, also rose 0.2% from January but is up 3.1% over the past 12 months. Meanwhile, food and energy prices rose by 0.2% in February, with eggs soaring another 10.4% in the month — taking its 12-month increase to a massive 58.8%.

Impact on Interest Rates

Immediately following the release, forecasts for next week’s FOMC policy meeting consolidated further around the expectation of no rate cuts, from a 96% chance to a 99% chance.

Looking ahead to the May FOMC meeting, the slight cooling of inflation in February appeared to have more of an impact — officials are now 7.2% more likely to keep rates steady in May compared to one day before, according to Fed Futures tracked by the Chicago Mercantile Exchange.

This is significant since, over the past month, markets had increasingly seen the potential for an interest rate cut in May but are now signaling that February’s price increases were low enough to keep the Fed from hiking, but within the context of other economic developments—not low enough to justify a cut just yet. 

Forecasts for the year-end 2025 Federal Funds Rate were unchanged from prior to the CPI release. The modal probability (32.6%) is that there will be three quarter-percentage point cuts between now and the end of the year.

What it Means for Rental Housing

This month’s CPI release comes amid a flurry of economic policy moves by the White House that could have both short- and long-run implications on growth and inflation. Hence, the slight change in CPI had a negligible impact on the prevailing outlook for key industries such as housing and commercial real estate but added some optimism to an increasingly uncertain economic landscape. In the months ahead, inflation data will likely gain importance as changes to US trade policy filter into pricing dynamics.