Markets shrieked and stocks frenzied last month when inflation seemed to accelerate at lightning speed. But a collection of data released this week shows that inflation's rapid growth could be slowing down.

Consumer prices rose 0.2 percent in February, meeting analyst expectations and easing fears that inflation is out of control. The Producer Price Index, which measures the change in what producers charge for their goods and services, also increased 0.2 percent last month.

Both readings, which are key gauges on how inflation is performing, came in fairly subdued when compared to other months. And both took a backseat to retail sales, which unexpectedly tumbled for a third straight month.

Retail spending fell 0.1 percent in February on the heels of 0.1 percent decreases in January and December, the Commerce Department said Thursday. Economists predicted that retail sales would increase 0.3 percent last month.

The slip caused 10-year Treasury yields to rally to a key resistance area of 2.80 percent, while economists downgraded their forecasts for economic growth in the first quarter.

So, why the drop? According to the sales report, consumers cut back on purchasing motor vehicles and gasoline. Consumer demand for furniture and home furnishing stores, electronics and appliance vendors, food and beverage sellers and health and personal care stores also fell.

The dip seems contrary to growing optimism about the state of the economy. Americans' confidence in the economy rose to a 17-year high February in the wake of the $1.5 trillion tax cut, according to the Bloomberg Consumer Comfort Index. That's when many Americans began seeing the first signs of a lift in their paychecks.

Consumer spending is the largest part of the economy and one of the best indicators of its vigor. The idea is that if Americans have more money in their pockets, they'll have more disposable income and thus spend more. Coupled with a robust labor market, this should add to increased spending, which would impel producers and manufacturers to increase production of goods, which would help stimulate economic growth.

But that's not what we're seeing — not now, anyway.

"The consumer genuinely is taking a little bit of a breather," JPMorgan Chase economist Michael Feroli told The Wall Street Journal. "We think the fundamentals are still supportive of better growth ahead."

The Fed is likely thinking the same.

Although the slump in retail sales — and the mild PPI and CPI — suggest a cooldown in inflation, the table is still set for the central bank to raise interest rates when it meets next week.

All signs point to the Fed maintaining its gradual path of interest rate hikes and increasing the benchmark interest rate by a quarter of a basis point. And while the markets are abuzz with the possibilities, policymakers haven't indicated plans to revise their forecast and accelerate the frequency of rate hikes this year from three to four.

But we shouldn't completely dismiss the idea. Economists with Morgan Stanley speculate that four hikes this year could happen — the conditions are ripe for it — but caution it's still too early in the year for the Fed to make that call, especially when it doesn't fully know the effects of shrinking its hefty balance sheet will have on the economy.

We'll just have to keep our eyes on what developments come out from the Fed's meeting March 20-21, the first policy gathering headed by new Chairman Jerome Powell.

In other mortgage news this week… 

• Senate lawmakers this week passed a bipartisan bill that rolls back some of the more stringent requirements of the Dodd-Frank legislation imposed against the nation's banks. The bill brings relief to smaller and mid-sized banks, although it leaves some key aspects of the earlier law in place. The bill will head to the House for final approval before it becomes law.
• Mortgage refinances fell to a decade low as the refinance share of all mortgage applications plummeted to 40 percent, its lowest ranking since 2008.