U.S. consumer prices rose less than anticipated in February, providing a sliver of reassurance to households and businesses rattled by President Donald Trump’s escalating trade war and its potential to stoke inflation.
The Bureau of Labor Statistics (BLS) reported Wednesday that the Consumer Price Index (CPI), a broad gauge of goods and services costs, edged up a seasonally adjusted 0.2% for the month, slowing from January’s 0.5% jump and bringing the annual inflation rate to 2.8%.
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The core CPI, which strips out volatile food and energy prices, also increased by 0.2%, down from January’s 0.4%, with a 12-month rate of 3.1%. Economists polled by Dow Jones had forecasted 0.3% monthly gains for both headline and core CPI, with annual rates of 2.9% and 3.2%, respectively—making February’s figures a welcome 0.1 percentage point below expectations.
Markets reacted positively, with stock futures climbing and Treasury yields ticking higher after the release.
Shelter costs, a hefty one-third of the CPI’s weighting, rose 0.3%—easing from January but still driving nearly half the monthly increase. The BLS noted that a key sub-measure, owners’ equivalent rent, also rose 0.3%. Food and energy indexes each gained 0.2%, though standout spikes included a 10.4% surge in egg prices (up 58.8% annually) and a 2.4% rise in beef, pushing a broader meat, poultry, and fish index up 7.7% over the year.
Used vehicle prices leapt 0.9%, apparel climbed 0.6%, and motor vehicle insurance rose 0.3% (11.1% yearly). Airline fares, however, dropped 4%, shaving 0.7% off their annual rate.
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Real average hourly earnings, adjusted for inflation, nudged up 0.1% for the month and 1.2% from a year ago, per a separate BLS report, offering workers modest purchasing power gains.
The data lands at a pivotal moment, as Trump’s newly enacted 25% tariffs on steel and aluminum—effective Wednesday—join 20% levies on Chinese goods, amplifying fears of a broader trade war. The European Union retaliated Wednesday with $28 billion in countermeasures, targeting U.S. steel, aluminum, textiles, appliances, and agriculture starting April 1. Economists warn that while tariffs typically exert limited, short-term pressure on inflation, an entrenched conflict could embed costlier price hikes into the economy.
Federal Reserve officials, meeting next week, are eyeing these developments as they weigh monetary policy. The Fed’s key rate, currently at 4.25%-4.5%, is expected to hold steady, though markets anticipate a May rate cut, with 0.75 percentage points of reductions by year-end 2025.
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