Between January and February, the Consumer Price Index (CPI) rose 0.4 percent, slowing from the month prior as well.
The CPI rose six percent from a year ago, below January's figure and in line with expectations, according to Labor Department data released Tuesday.
While this was the smallest annual rise since September 2021, the level remains well above policymakers' longer-term two percent inflation goal.
"As challenges in the banking sector remind us, there will be setbacks along the way in our transition to steady and stable growth," said President Joe Biden in a statement on Tuesday.
"But we face these challenges from a position of strength," he added, noting he would continue "working to lower costs" for Americans.
- Worsening position -
The Labor Department said the "index for shelter was the largest contributor... accounting for over 70 percent of the increase," with rent prices adding to pressures.
It added that the indexes for food, recreation, as well as household furnishings and operations were also contributors.
In particular, the food index in February remains nearly 10 percent above last year's level, with prices of dining out still high.
"This stickiness in the most essential categories, where it is hard for consumers to cut volumes, means the squeeze on discretionary budgets continues," said Neil Saunders, managing director of analytics firm GlobalData.
He warned that the financial position of many households is worsening, and that "inflation is not an enemy that consumers can withstand indefinitely."
In February, costs of shelter and transportation services ticked up.
And underscoring the difficulty of cooling inflation, the "core" CPI figure excluding the volatile food and energy segments came in stronger than expected -- up 0.5 percent from January.
Taken together, the readings are "not good enough to stop the Fed hiking next week, provided markets are calm," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Underlying inflation in services is "declining painfully slowly" as well, he said, adding that the progress will not be enough to placate more hawkish policymakers at the Fed.
- Financial stability key -
While many analysts had predicted that the central bank could step up its rate increases as the economy runs hotter than hoped, some are dialing back their expectations now.
Current data supports a 25 basis points rate hike at the Fed's upcoming policy meeting, said economist Rubeela Farooqi of High Frequency Economics.
This would be the same magnitude as the Fed's last increase in February.
"However, the decision ultimately will depend not only on the economic data but also financial stability concerns, which could keep the Fed on the sidelines next week," she said.