With this report, it's clear the Fed is “almost certainly raising rates this month but certainly there's no reason to do more, like 50 points,” Brown said.

Treasury yields dipped while the dollar gave up gains following the CPI data and came under further downward pressure following news that U.S. Secretary of State Rex Tillerson is being replaced.

The lack of an upside surprise on the CPI figures may help calm a market that remains on edge after data released in February showed wages and prices rising faster than anticipated, leading investors to sell stocks on concern the Fed would raise interest rates more aggressively.

Fed officials target 2% annual inflation based on a separate index, the Commerce Department's gauge linked to consumer spending. Price increases have largely remained below that goal in recent years.
The increase in the core index brought the three-month annualized gain to 3.1%, following a 2.9% reading in January.

Auto prices restrained inflation, as the cost of new vehicles fell 0.5% in February, the most since 2009, while used cars and trucks were down 0.3%, breaking a four-month streak of gains. Wireless-phone services, which constrained inflation last year, fell 0.5%.
Much of the recent acceleration in core inflation — as slow as it is — has been driven by a modest easing in consumer core goods price deflation, which has resulted from continued weakness in the dollar. Meanwhile, core services inflation has been on a stable trajectory in the last few months. For core services to pick up more appreciably, wage inflation needs to accelerate. The retracement in February average hourly earnings, per the latest payrolls report, serves as a reminder that wage pressures remain tame.– Yelena Shulyatyeva and Carl Riccadonna, Bloomberg EconomicsThe core gauge rose less than in the prior month despite apparel costs, which helped drive the outsize gain in January, advancing 1.5% in February following a 1.7% increase. Hospital services, another component watched by analysts, fell 0.5%.

The CPI is the broadest of three price gauges from the Labor Department because it includes all goods and services. About 60% of the index covers the prices that consumers pay for services ranging from medical visits to airline fares, movie tickets and rent.