US inflation data shows signs of pick-up as Fed meets

US consumer prices fell in February, led lower by another sharp decline in energy prices, but core inflation rose firmly, official data showed Wednesday.

The Commerce Department's consumer price index (CPI) fell 0.2 percent in February, in line with expectations, after staying flat in January.

Overall energy prices dropped 6.0 percent, twice as much in the prior two months. Gasoline prices were down 13.0 percent.

Food prices edged up 0.2 percent from January.

Stripping out food and energy, the more indicative core CPI rose 0.3 percent in February, the same as in the prior month.

Year-over-year, consumer prices were up 1.0 percent and core prices 2.3 percent, above the Federal Reserve's 2.0 percent inflation target.

The Fed's policy arm, the Federal Open Market Committee, was meeting on Tuesday and Wednesday to review its outlook on expected interest rate increases, with the strength of inflation a key determinant of how soon the next hike could happen.

The Fed's preferred inflation measure has strengthened but remains shy of the target at 1.7 percent.

Because of that and other concerns, the FOMC is not expected to announce a change in interest rates after wrapping up the two-day meeting Wednesday afternoon.

But the FOMC could also indicate that the current level of the benchmark federal funds rate, an ultra-low 0.25-0.50 percent, might not hold for much longer.