March 12 (Reuters) - Federal Reserve policymakers held

the benchmark overnight interest rate steady in the 5.25%-5.50%

range at the Jan. 30-31 policy meeting, but said they would

consider reducing it once they are more confident inflation will

fall to the U.S. central bank's 2% target.

Data on inflation, jobs and consumer spending will influence

that decision, with the next meeting on March 19-20. Here's

what's been happening:

INFLATION (CPI

released March 12

; next release PCE March 29)

The

CPI

rose 3.2% on a year-on-year basis in February, a tick up

from 3.1% in the prior month, and higher than analysts expected.

The core rate excluding food and energy costs, meanwhile, only

edged down to 3.8% from 3.9%, another reminder that the Fed's

inflation battle may last longer than anticipated. Rising

gasoline and shelter costs contributed the bulk of the CPI

increase. Whether the Fed's hoped-for consistent easing in

housing costs is imminent remains uncertain.

The personal consumption expenditures (PCE) price index,

which the Fed uses to set its 2% inflation target, increased at

a 2.4% annual rate in January, the slowest year-on-year increase

in nearly 3 years. Core inflation stripped of volatile food and

energy prices rose 2.8%, a slight decline from December's 2.9%

reading.

EMPLOYMENT (

Released March 8

; next release April 5):

U.S. firms added a larger-than-expected

275,000 jobs in February

, though employment gains in the previous two months were

revised lower by 167,000. The unemployment rate rose to a

two-year high of 3.9% as a rise in the size of the workforce was

outweighed by a larger increase in the number of people

reporting they were out of work.

Fed officials have become more comfortable with the idea

that continued strong job growth could still allow inflation to

fall, especially if the supply of labor continues to grow and

wage growth eases.

On the wage front, growth eased on a month-to-month

basis to just 0.1%, the smallest increase in two years and

essentially neutralizing the unexpectedly strong jump in hourly

pay the month before.

The annual increase, meanwhile, slowed to 4.3% from

4.4%. While marking further progress, that level is still well

above the 3.0%-3.5% range that most policymakers view as

consistent with the Fed's 2% inflation target.

JOB OPENINGS (Released March 6; next release April 2)

Fed Chair Jerome Powell keeps a close eye on the U.S. Labor

Department's Job Openings and Labor Turnover Survey (JOLTS) for

information on the imbalance between labor supply and demand,

and particularly on the number of job openings potentially

available to each person who is without a job but looking for

one. The ratio had been falling steadily towards its

pre-pandemic level, but has stalled for the last four months at

just above 1.4-to-1, higher than the 1.2-to-1 level seen before

the health crisis. Other aspects of the survey, like the quits

rate, have edged back to pre-pandemic levels.

RETAIL SALES (Released Feb. 15; next release March. 14):

Retail sales fell more than expected in January, dropping

0.8%. They were pulled down by declines in receipts at auto

dealerships and gasoline service stations, and consumer spending

was also likely weighed down by winter storms. The decline

followed a fairly strong performance over the holiday season and

could indicate economic growth will slow sharply this quarter.

If it does, it would finally be a sign the aggressive rate

hikes Fed policymakers delivered from March 2022 to July 2023

are trimming overall demand for goods and services in what has

up to now been a markedly resilient economy.