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An underlying measure of inflation was stronger than expected last month, introducing greater uncertainty over when the Federal Reserve will lower interest rates.

The U.S. Department of Labor Department’s Consumer Price Index (CPI) reported prices rose last month by 3.2% from one year earlier – up slightly from the 3.1% uptick recorded in January. On a month-over-month measurement, prices were up by 0.4%.

Core prices – which exclude food and energy items – were up 3.8% year-over-year and up 0.3% month-over-month.

The uptick in the CPI will be considered next week when the Federal Reserve’s policy making committee meets to determine the state of the rate environment. Appearing last week before the House of Representatives, Federal Reserve Chairman Jerome Powell would not commit to a rate cut timeline, stressing the central bank was still concerned over inflation.

“We believe that our policy rate is likely at its peak for this tightening cycle,” he said. “If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year. But the economic outlook is uncertain, and ongoing progress toward our 2% percent inflation objective is not assured.”

Powell added, “Reducing policy restraint too soon or too much could result in a reversal of progress we have seen in inflation and ultimately require even tighter policy to get inflation back to 2%. At the same time, reducing policy restraint too late or too little could unduly weaken economic activity and employment. In considering any adjustments to the target range for the policy rate, we will carefully assess the incoming data, the evolving outlook, and the balance of risks.”

National Association of Realtors Chief Economist Lawrence Yun reviewed the data through a housing spectrum.

“The heavyweight component of housing/shelter decelerated to 5.7%, thereby keeping the overall CPI above the 2% target, though many unofficial private sector data have been implying much lower rent growth,” Yun said. “The latest data does not fundamentally change what the Fed will likely do – three rate cuts this year. However, with anticipated further easing in inflation, especially as rents in the official measurement are showing calming patterns, five to eight rounds of rate cuts by the end of next year will help lower mortgage rates. The one big limiting factor is the large budget deficit. More government borrowing will mean fewer funds are available for mortgage borrowing. There is a good possibility that mortgage rates will head toward 6%, but they will be hard-pressed to go down further.”

First American Economist Ksenia Potapov also considered the data’s impact on housing.

“Shelter and service inflation are slowly decelerating,” Potapov said. “Goods deflation, common throughout the past two decades, is helping push CPI down. Zoomed out, this CPI report suggests that inflation is cooling overall, but doing so slowly. Services inflation is stubborn to come down in part because it includes shelter. Shelter inflation lags observed prices by approximately six to 12 months by virtue of how it is measured, so slower rent growth over the past year is expected to drag headline inflation down over time.”

“The Federal Reserve wants to see more evidence that inflation is slowing before cutting rates, which may simply mean more months of slow deceleration,” Potapov added. “The Fed is unlikely to cut rates before the latter part of this year, and February’s CPI numbers only solidify that. The housing market isn’t expecting rate cuts in time for the start of the spring home-buying season, but this spring is still expected to be stronger than last. However, when the Fed does cut rates, we may see pent-up demand driving an unseasonable uptick in home sales.”