U.S. consumer prices saw a moderate increase in February, with the Consumer Price Index (CPI) rising by 0.2%. This marked the smallest gain since October, following a 0.5% rise in January. Higher shelter costs partly drove this slight uptick, with an increase of 0.3% for shelter accounting for nearly half of the CPI rise. However, a notable 4.0% decline in airline fares suggested weakened demand as both consumers and corporations cut spending, impacting the overall economic outlook.
The recent heavy losses in the stock market highlight ongoing trade tensions that threaten the U.S. economic expansion. While the CPI report provided some relief, economists warn that this could be short-lived. The report did not account for the wave of tariffs initiated by President Donald Trump’s administration, which have led to increased inflation expectations among consumers. Chris Low, chief economist at FHN Financial, noted that the uncertainty surrounding prices is likely to affect the Federal Reserve’s actions in the future, although they may consider cuts as circumstances stabilize.
Gasoline prices fell by 1.0% as global demand cooled, while food prices slightly rose by 0.2%. Grocery prices remained stable, though egg prices jumped 10.4% due to an avian flu outbreak leading to significant shortages. Year-over-year, the CPI increased by 2.8% in February, following a climb of 3.0% in January. Inflation expectations among consumers surged, with fears of rising prices prompting increased purchases of big-ticket items in February.
This trend may affect future economic data. The core CPI, excluding food and energy, saw a 3.1% lift over the year. In response to evolving economic conditions, the Federal Reserve is anticipated to maintain its current interest rate range in its upcoming meeting, while markets expect potential rate cuts by June amid worsening economic indicators.