Consumer prices were unexpectedly unchanged in February as a drop in energy costs was offset by higher food and medical care costs, a government report showed on Thursday, backing up the Federal Reserve's commitment to ultra low interest rates.
The Labor Department said its seasonally adjusted Consumer Price Index was flat after rising 0.2 percent in January.
Analysts polled by Reuters had forecast consumer prices rising 0.1 percent in February. Compared to February last year, prices rose 2.1 percent.
A government report on Wednesday showed muted inflation pressures at the wholesale level. The U.S. central bank this week renewed a promise to keep its benchmark interest rate exceptionally low for an extended period, citing a moderate economic recovery and low rates of resource utilization.
Energy costs fell 0.5 percent last month, the biggest drop since April, after surging 2.8 percent in January, the Labor Department said. Gasoline prices declined 1.4 percent, the largest fall since March, partially unwinding January's 4.4 percent surge. Food prices edged up 0.1 percent in February after rising 0.2 percent.
Excluding volatile energy and food prices, the closely watched core measure of consumer inflation inched up 0.1 percent last month after falling in January for the first time in 28 years. Core prices fell 0.1 percent in January.
Analysts had expected core prices to edge up 0.1 percent. Core prices were bumped up by rising costs for vehicles and medical care. Medical care costs rose 0.8 percent for the second straight month.
The gain in core prices was, however, limited by shelter costs, which were unchanged, as well as a 0.7 percent drop in apparel. The decline in apparel prices was the biggest since October 2008.
Compared to February last year, the core inflation rate rose 1.3 percent, slowing from a 1.6 percent year-on-year increase in January. Analysts had expected core prices to rise 1.4 percent year-on-year.
(Reporting by Lucia Mutikani; Editing by Neil Stempleman)