T oday’s consumer price index (CPI) inflation report from the Bureau of Labor Statistics confirms that the decline in inflation that began in the summer of 2022 has stalled. The price level increased by 0.4 percent in February, for an annual inflation rate of 3.2 percent.

Since this inflationary episode peaked at 9 percent in June 2022, year-over-year CPI first went below 4 percent in June 2023. It has been between 3 percent and 3.8 percent every single month since then. Monetary policy affects inflation with long and variable lags, so it was sensible to wait and see what the Federal Reserve’s interest-rate increases would do. Now, though, it’s safe to say we’re stuck.

The inflation rate for all goods except food and energy, or core inflation, was 3.8 percent year over year in February. The U.S. has had higher core inflation than overall inflation since March 2023. I wrote about this last year using the PCE price index. The flip happened in the same month for the CPI.

A big part of the reason for the flip was gasoline prices. As the CPI measures them, year-over-year gasoline prices began increasing quickly in March 2021. Year-over-year prices were up by more than 35 percent for each CPI report from April 2021 to July 2022. The highest reading was from June 2022, at 60 percent. Those large numbers for gasoline, something most Americans buy regularly, played a significant role in pulling up the average during the first phase of the current inflationary episode.

As gasoline prices have come down, the year-over-year numbers declined and then went negative. Year-over-year prices first went negative in December 2022, then stayed negative from February 2023 through August 2023, bottoming out at −27 percent in June. After a flare-up in September, they have been negative again since October of last year.

While gasoline prices were initially partly to blame for higher overall CPI inflation, year-over-year gasoline prices have since December 2022 always been below the overall rate of CPI inflation. When they were significantly negative for a big chunk of last year, they were doing a lot to pull CPI inflation down.

That’s why it’s concerning that core inflation has remained higher than overall inflation. It means that if you don’t include gasoline or other energy prices or food prices, which are supposed to be more volatile, inflation is higher for the stuff that is supposed to be less volatile. Finger-pointing at the energy markets has not been a valid excuse for inflation since December 2022.

And time’s up for gasoline prices to significantly drive overall inflation down. That −27 percent year-over-year number from June is a thing of the past, as gasoline prices have been relatively stable for many months now. February’s year-over-year gasoline-price change was −4 percent.

The year-over-year contribution from the entire energy category in the February inflation report was only −1.9 percent. It’s unlikely that any huge year-over-year price declines on par with what we saw last year are coming this year. If anything, the risk lies in the other direction, with Iran-backed groups in Yemen and elsewhere in the Middle East stirring up conflict and hindering trade. An oil-price spike would likely send overall inflation upwards again.

Barring such a spike, the challenge now for policy-makers is getting inflation, which is stuck between 3 and 4 percent, back down to between 1 and 2 percent. These might seem like small numbers, but that is a big difference, and the Fed has rightly been insistent on maintaining its 2 percent long-run target. The job simply is not done yet.

One thing that isn’t helping: fiscal policy. The federal government ran a $2 trillion deficit last year and is likely to run one almost as large this year. The president’s budget requests a $1.8 trillion deficit next year. All this extra spending makes the Fed’s job harder, as Jerome Powell has belatedly acknowledged.

With no signs of federal spending slowing and with inflation above the Fed’s target rate in non-energy goods, the Fed will need to keep interest rates where they are, or possibly raise them, to maintain its credibility as a central bank with a handle on inflation. It has staked that credibility, and Powell has staked his career, on returning the U.S. to 2 percent annual inflation in the long run. The U.S. stopped making progress towards that goal in June 2023.

In an election year, the pressure will likely increase for the Fed to cut rates. Biden has started to talk about rate cuts, saying on Friday, “I bet you rates come down.” Politicians want easy money when they’re asking for voters to reelect them, which is one of the top reasons why monetary policy should not be left to politicians. The Fed under Powell has so far demonstrated admirable independence from politicians. It will be facing its greatest test on that front in the next several months.