Higher prices at the gas pump pushed up inflation more than expected in February, according to the latest Consumer Price Index from the Bureau of Labor Statistics.

However, inflation did slow in other key areas like food and housing, fueling a touch of positive news for the Federal Reserve and consumers alike.

Overall, the closely watched inflation gauge showed that prices rose by 3.2% for the 12 months ended in February, the BLS said Tuesday. That’s up slightly from January’s annual reading of 3.1%, and higher than economists’ expectations.

On a monthly basis, CPI rose by 0.4% in February, in line with expectations. It’s the fastest pace since September.

“Inflation is like a bobsled track, it slopes down with many twists and turns,” Sung Won Sohn, a Loyola Marymount University economics and finance professor and chief economist of SS Economics, wrote Tuesday. “The uptick in the inflation rate supports the Federal Reserve’s ‘go-slow’ approach in cutting the interest rate.”

Pushing inflation higher in February was a sharp climb in gas prices and the continued steady rise in shelter costs. Combined, those two categories were responsible for 60% of the monthly increase, the BLS said.

Excluding gas and food prices, categories that tend to be more volatile, “core” inflation rose 0.4% from the month before, bringing its annual rate to 3.8%, a slowdown from 3.9% in January.

Stocks rose Tuesday morning as investors cheered the cooldown in some categories of inflation. The Dow rose 97 points, or 0.3%. The S&P 500 gained 0.5% and the Nasdaq Composite added 0.6%, both on pace to snap a two-day losing streak.

Food prices were flat

Outside of gasoline (up 3.8%) and related fuel and energy costs, some of the categories that saw the biggest price spikes included girls’ apparel (up 6.8%); eggs (up 5.8%); and airline fares (up 3.6%).

Prices dropped for dairy products and hospital services (both down 0.6%); and fruits and vegetables (down 0.2%).

Still, there was some good news for Americans: For the first time since April 2023, overall food prices did not rise. Grocery prices held flat, while “food away from home” (restaurants) ticked up last month by just 0.1%.

On an annual basis, overall food price inflation slowed to 2.2%, the lowest rate since May 2021. It is now edging even closer to pre-pandemic norms.

“There’s progress there, absolutely,” said Mike Pugliese, senior economist at Wells Fargo.

“But what I would stress is, you just got back there,” he told CNN. “Food’s volatile, and the Fed’s got a lot less control over that … but you want to see that sustained.”

Also, gas prices are still cheaper than they were this time last year, running 3.9% lower, according to the CPI.

“So far in March, gasoline prices have remained virtually unchanged, which, if sustained, will make energy prices a non-issue for March’s CPI release,” Eugenio Aleman, Raymond James’ chief economist, wrote Tuesday.

Stubbornly high shelter prices show progress, but pressures remain

There was also a slightly encouraging improvement in housing-related costs, which have been a significant reason why inflation remains elevated.

Shelter inflation eased to 0.4% from the month before, after spiking by 0.6% in January. Annually, shelter prices are up 5.7%, the lowest that rate has been since July 2022.

“The shelter numbers continue to very gradually, but very steadily, come down on a year-over-year basis,” Pugliese said.

The housing component of inflation has proved frustrating for economists and other observers because even while the government’s evaluation of shelter costs— which has a time lag — remains high, private sources of more recent data have shown rent cooling over the past year.

But two separate non-government measures of rent are now showing that rent is climbing again, even hitting record highs.

Rent in February was about 30% above pre-pandemic levels, according to Zillow, with the typical rent last month hitting $1,959. That’s up 3.5% from a year ago.

Redfin’s data shows a similar pattern, with the asking median rent hitting $1,981 in February, a record high in its data. That’s up 2.2% from the year before and marks the largest annual gain since January 2023.

While increased homebuilding has reduced rent prices in some cities, it hasn’t happened everywhere, especially not in high-cost dense cities like New York or Boston. And, with mortgage rates staying higher for longer, more would-be buyers are sitting out this spring homebuying season and continuing to rent, which pushes rents up.

“Mortgage rates ticked back up in February — a disappointing development for prospective homebuyers, who just a few months ago got a glimmer of hope as rates finally started to fall,” said Daryl Fairweather, Redfin’s chief economist, in a statement. “With rates still elevated, many are opting to continue renting, which is buoying rental demand and, as a result, rent prices.”

Will this delay rate-cutting by the Fed?

The February CPI print is a “treading water” type of number, Pugliese told CNN.

“Not getting a whole lot better, not getting a whole lot worse,” he added.

That being said, there are other indicators that suggest “six months forward, this trend will resume a downward trajectory,” due to decelerating wage growth data and indications that price-hiking desires are waning.

The latest NFIB Small Business Optimism Index, which was also released Tuesday, showed that 21% of survey respondents planned to raise prices, the lowest share since January 2021.

Fed members, and specifically Chair Jerome Powell, have said they want to see more “good data” before they start cutting interest rates.

As it stands now, the central bank won’t be in a hurry to cut rates, certainly not next week at its policy meeting, and possibly not in May, Pugliese said.

“We still expect rate cuts this year, regardless,” he said. “Whether the exact timing is May or June or July, I think something in that window is realistic.”