Core consumer prices, which exclude volatile food and energy, posted their biggest 12-month increase in nearly three years even as low oil prices pushed the overall cost of living down in February, the Labor Department said Wednesday.
The consumer price index, a key indicator of inflation, declined 0.2% last month after being unchanged in January. It was the third decline in six months.
A 13% drop in gasoline prices more than offset other rising costs, including food, apparel and medical care.
Aside from food and energy, so-called core prices increased 0.3% for the second straight month in February.
For the 12 months ended Feb. 29, core prices increased 2.3%. That was the largest 12-month gain since May 2012, the Labor Department said.
Core prices have been rising steadily in recent months, a sign that underlying inflation is picking up.
Fed officials conclude a monetary policy meeting Wednesday but are expected to keep their key short-term rate steady when they announce their latest action at 11 a.m. PST.
Fed Chairwoman Janet L. Yellen is scheduled to hold a news conference at 11:30 a.m., and she's likely to be questioned about her expectations for inflation.
Chris Rupkey, chief financial economist at Union Bank in New York, said it was "pretty incredible that Fed policymakers are widely expected to do nothing at Wednesday's meeting" given more signs of rising inflation.
"To pretend inflation is too low just because the oil crash lowered gasoline prices ... currently seems intellectually dishonest to say the least," he said.
The Fed uses a different inflation measure, based on personal consumption expenditures, that tends to run lower than the consumer price index. Core prices using that measure were up 1.7% for the 12 months ended Jan. 31, the latest data available.