By Harriet Torry 

WASHINGTON -- Inflation cooled slightly for American consumers last month, keeping the Federal Reserve on track to raise short-term interest rates next week, but relieving it of pressure to take more dramatic action to prevent the economy from overheating.

A decline in gasoline and fuel-oil costs kept a lid on price pressures in February, along with a muted rise in the cost of rent and a drop in car prices. The consumer-price index, which measures what Americans pay for everything from shampoo to hotel stays, increased 0.2% in February after rising a seasonally adjusted 0.5% in January, the Labor Department said Tuesday.

Unrounded, the CPI showed an even smaller increase: by 0.150% in February from 0.539% in January. Excluding the volatile food and energy categories, so-called core inflation slowed to a rate of 0.182% in February from January's 0.349%, the biggest increase since March 2005.

Tuesday's report tempered signals from last month of a pickup in inflation that had sent shock waves through financial markets. Nonetheless, economists cautioned that annual measures of price increases could snap back next month, when exceptionally low readings for a handful of items last year, such as wireless cellphone services, wash out of the data.

Overall prices rose 2.2%, while core prices were up 1.8% in the year to February.

"Together, these figures should satisfy Fed policy makers that inflation is not too cold -- as last spring's numbers hinted at -- or too hot, as might have been inferred from the January print," JPMorgan Chase economist Michael Feroli said in a note to clients.

Recent data now show the economy in a sweet spot with moderate inflation in February, together with bumper job creation, a 4.1% unemployment rate and strong consumer sentiment readings.

Fed-funds futures tracked by CME Group showed investors priced in an 86% probability of a quarter-percentage-point rate increase by the Fed next week.

Fed policy makers held their benchmark short-term interest rate steady in January, in a range between 1.25% and 1.5%, and signaled greater confidence that inflation would rise to their 2% target. Core inflation was only 1.5% in January, according to the Fed's preferred measure, the Commerce Department's personal-consumption expenditures index. Yet Tuesday's consumer-price index marked the third straight month in which core prices increased at an annual rate of 1.8%, suggesting inflation is rising at a moderate pace.

Swings in some goods prices drew attention from financial analysts. Prices of both new and used vehicles declined in February for the second straight month, which economists attributed to a pullback in demand after consumers hit by late-summer hurricanes last year replaced damaged cars and trucks.

Apparel prices increased for the second straight month, rising 1.5% after January's 1.7% gain; a surprise since the category has experienced deflation for most of the past two decades.

"Moves of this order are outsized, and are unlikely to be sustained for very long," said Barclays economist Pooja Sriram.

Write to Harriet Torry at harriet.torry@wsj.com

(END) Dow Jones Newswires

March 13, 2018 13:01 ET (17:01 GMT)