A key measure of U.S. consumer prices rose less than expected in February as costs of used vehicles, clothing and transportation services declined from a month earlier, suggesting broader inflationary pressures remain tame.

The core consumer price index, which excludes volatile food and energy costs, increased 0.1 per cent from a month earlier and 1.3 per cent from the prior year. The overal CPI rose 0.4 per cent from the prior month and 1.7 per cent from a year earlier, a Labor Department report showed Wednesday.

The median estimate in a Bloomberg survey of economists for the month-on-month change in the CPI was for a 0.4 per cent gain. The core measure was projected to rise 0.2 per cent.

Treasuries pared earlier losses, while inflation expectations remained higher and the yield curve added slightly to its steepening on the day. The dollar edged lower from earlier highs and U.S. stock futures rose, reversing earlier losses.

Yields on U.S. Treasuries have surged recently on inflation bets, but Federal Reserve officials have brushed off the concerns and expect any pickup to be transitory.

Investors and economists are split on the inflation outlook, with some predicting a wave of rising prices driven by stronger demand and pandemic stimulus, while others say the forces that have contained price pressures for years -- from technology to demographics -- are still in place.

Despite the softer-than-expected figures, inflation is poised to accelerate in the months ahead -- driven by pandemic stimulus, income growth and a vaccination campaign that’s helping businesses to reopen.

Starting with the March data, the so-called “base effect” will push up the headline rate, because sharp declines in prices at the start of the pandemic will influence the year-on-year calculations. That means even fairly small price increases during the month will likely cause the annual measure to jump above 2 per cent.

Some pockets of the economy are already showing signs of bubbling inflationary pressures. In January, a measure of producer prices surged by the most in records dating back to 2009. The Institute for Supply Management’s factory measure of prices paid for materials rose to the highest since 2008 last month.

The Biden administration’s US$1.9 trillion stimulus bill will add to the more than US$1 trillion in excess savings that American households racked up during the pandemic. It’s unclear how much of that money they’ll spend in the coming months on things they couldn’t do during the health crisis, like restaurant dining or travel.

The CPI report showed prices of goods, excluding food and energy, declined 0.2 per cent in February from a month earlier, the first decrease since May. Apparel and medical care commodities costs both dropped 0.7 per cent, while prices of used vehicles fell 0.9 per cent for a third month.

Services prices minus energy rose 0.2 per cent, the first increase in three months, reflecting higher shelter costs and medical care services.