US inflation slowed more than expected in February, with core inflation posting its smallest gain since 2021 — although the data was gathered before President Trump began to ramp up his tariff wars this month.
The Consumer Price Index rose 2.8% over the past 12 months — below the 2.9% gain that economists had expected and also below last month’s surprisingly strong 3% reading, the Bureau of Labor Statistics said Wednesday.
Core CPI, which excludes volatile food and energy prices, came in at 3.1% — the lowest reading since April 2021.
Federal Reserve building. 3
The Consumer Price Index rose 2.8% over the past 12 months, according to government data.
Dow Jones futures rose 223 points, or 0.5%, on the softer inflation report. S&P 500 futures jumped 0.8% higher, and Nasdaq 100 futures gained about 0.9%.
“The tariff-battered markets are going to breathe a sigh of relief this morning, as higher inflation was the only thing that could make things worse,” Chris Zaccarelli, chief investment officer at Northlight Asset Management, said in a note.
Even with a weaker-than-expected CPI and flailing markets, the Fed is likely in “wait-and-see” mode for at least the next six months as it navigates uncharted waters, according to Skyler Weinand, chief investment officer at Regan Capital.
The less heated report comes as inflation concerns have mounted over President Trump’s trade policies, and investor optimism for interest rate cuts anytime soon has dipped.
However, February’s report does not capture the impact from Trump’s tariffs.
President Trump’s threatened tariffs on Canada and Mexico — which are currently on a second 30-day pause — and his 20% levy on China have spurred fears of inflation and a possible recession.
Inflation jumped 0.2% in February after advancing 0.5% the month before, according to government data.
Trump’s 25% tariffs on steel and aluminum imports took effect early Wednesday morning. The European Union announced retaliatory tariffs that will take hold in April.
Heightened trade tensions have spooked investors and stoked volatility in the markets.
The “Magnificent 7” tech stocks — Tesla, Nvidia, Alphabet, Meta, Amazon, Apple and Microsoft — have shed more than $1.5 trillion off their combined valuation since the start of 2025 after enjoying huge gains last year.
In February, shelter – which includes rents – rose 0.3% and accounted for nearly half of the total all-items increase, according to the data released Wednesday.
The jump in shelter prices was partially offset by a 4% decrease in the index for airlines fares and a 1% dip in gasoline. Rising electricity and natural gas prices still contributed to a 0.2% hike in energy prices.
Food prices rose 0.2% in February after rising 0.4% the month before, with a notable 1.6% increase in the index for meats, poultry, fish and eggs.
A rampant bird flu outbreak has forced farmers to cull flocks and caused a widespread shortage – driving a massive 10.4% jump in egg prices in February, according to the data.
The Department of Justice is reportedly investigating whether producers have illegally conspired to further restrict supply and reap the benefits from staggering prices at the grocery store, sources told The Wall Street Journal.
Egg prices have jumped a shocking 58.8% over the past 12 months, the Labor Department said on Wednesday.
Beef prices also jumped 2.4% in February after a 0.7% increase the month before as experts warn shrinking herd levels could continue sending prices skyward.
Heated consumer and producer price reports early last month had some economists warning that rate hikes could even be on the table.
But the personal consumption expenditures index — the Fed’s preferred inflation gauge — signaled easing inflation later that month.The Federal Open Market Committee is set to meet on March 18-19, when investors largely expect they’ll keep interest rates the same in the target 4.25% to 4.5%, according to CME FedWatch.
