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WASHINGTON—Consumer prices in the U.S. rose more slowly than anticipated in February, temporarily relieving households and businesses amid growing concerns over the impact of tariffs on inflation. The Bureau of Labor Statistics reported Wednesday that the Consumer Price Index increased by 0.2% for the month, bringing the annual inflation rate to 2.8%. This follows a 0.5% monthly increase in January.
Excluding volatile food and energy prices, the core CPI rose 0.2% in February, marking a 3.1% increase over the past 12 months. Economists surveyed by Dow Jones had expected a 0.3% rise in both headline and core CPI, with annual rates of 2.9% and 3.2%, respectively.
Shelter costs, which account for over a third of the CPI weighting, increased by 0.3%, contributing to about half of the monthly CPI rise. The measure, which includes what homeowners estimate they could rent their properties for, also increased 0.3%.
Food and energy prices both climbed 0.2%, while used vehicle prices saw a notable jump of 0.9%. Apparel prices also increased, rising 0.6%. Within the food category, egg prices surged 10.4% in February, bringing the 12-month increase to a staggering 58.8%. The broader food index, which includes meat, poultry, and fish, was up 7.7% year-over-year, with beef prices climbing 2.4% last month.
Motor vehicle insurance rose 0.3% in February, up 11.1% annually. However, airline fares provided some relief, dropping 4% in February and 0.7% from the previous year.
According to a separate BLS release, inflation-adjusted average hourly earnings rose 0.1% in February and were up 1.2% from the previous year. While the Federal Reserve may welcome the cooling inflation rate, central bank policymakers remain cautious given the potential inflationary impact of President Donald Trump’s ongoing trade policies.
Trump’s 25% tariffs on steel and aluminum went into effect Wednesday, prompting swift retaliatory measures from the European Union. Additionally, Trump has implemented 20% tariffs on imports from China, adding further uncertainty to the inflation outlook. While generally viewing tariffs as temporary inflationary forces, Federal Reserve officials have warned that a prolonged trade war could lead to more entrenched price increases.
Goldman Sachs analysts noted that while the latest CPI report suggests some easing of inflationary pressures, risks remain. “The February CPI release showed further signs of progress on underlying inflation, with the pace of price increases moderating after January’s strong release,” said Kay Haigh, global co-head of fixed income and liquidity solutions at Goldman Sachs Asset Management to CNBC. “While the Fed is still likely to remain on hold at this month’s meeting, the combination of easing inflationary pressures and rising downside risks to growth suggest that the Fed is moving closer to continuing its easing cycle.”
Markets currently anticipate that the Fed will resume interest rate cuts in June, with a total reduction of 0.75 percentage points expected by the end of 2025. The central bank meets next week and is widely expected to maintain its benchmark interest rate within the current range of 4.25%-4.50%.
The latest inflation data comes at a time when economic growth is facing headwinds. The Atlanta Federal Reserve’s GDPNow tracker estimates that first-quarter economic growth will contract by 2.4%, marking the first negative quarter in three years.
