Inflation Fears Cool Stateside

Consumer prices south of the border rose 0.2% in February, in line with expectations and likely alleviating concerns that inflation is about to accelerate, according to the Labor Department.

Figures released Tuesday by the U.S. Labor Department revealed that, on a year-over-year basis, the consumer price index rose 2.2%, a bit ahead of the 2.1% increase reported in January.

Excluding volatile food and energy prices, the CPI was up 0.2% for the month and 1.8% annualized, unchanged from a month ago.

The release comes a month after the inflation posted its biggest gain in four years of 0.5%. That jump helped fuel inflation scares and contributed to a quick correction in the stock market that saw major indexes fall more than 10%.

Markets reacted quickly to both months' data, but in opposite ways. In January, the jump in CPI prompted an aggressive selloff in stocks amid interest rate fears. Tuesday's release of February numbers, however, pushed hopes higher, with a 100-point gain in the Dow industrials indicated when trading starts.

Investors are watching the inflation numbers closely for clues on how quickly the Federal Reserve will raise interest rates this year. Markets currently agree with Fed projections for three hikes, though a more aggressive inflation move could trigger additional increases.

March promises a near certainty for a rate move, with traders assigning a 31% chance of a fourth increase in December, according to experts.