Overall prices slowed last month, although the potential future effect of Trump's trade war remains unclear
US inflation cooled in February, rising at its slowest pace for four months as price growth eased ahead of what could be a punishing trade war.
Bureau of Labor Statistics data released Wednesday showed the annual consumer price index (CPI) fell to 2.8% last month, lower than economists surveyed by Bloomberg had expected, with the core CPI – which excludes volatile food and energy costs – also slowing to a pace of 3.1%.
But the coming months could see trouble ahead on the inflation front, with President Trump’s planned tariffs likely to put upward pressure on prices across a range of categories and drive costs higher for American consumers.
Trump announced he was pushing ahead with huge levies against Canadian and Mexican imports to the US last week, ultimately paring back most of those until April 2 when surcharges against other trading partners are also expected to take effect.
Financial markets have responded negatively to Trump’s tariff plans, which sparked a mass selloff on Wall Street as the president refused to rule out a recession and described potential price hikes as a “little disturbance”.
Shelter costs accounted for nearly half of February’s inflation, according to the BLS, but fell compared with January. Grocery prices saw little change, while airfares were down by 4% and car and health insurance costs continued to slow.
For now, the Federal Reserve’s path ahead on interest rates remains unclear. The central bank is scheduled to meet next week for its second deliberation on rates this year, but despite the economic unrest it doesn’t appear in a strong mood to continue slashing rates.
In February, Fed chair Jerome Powell told a Senate committee that decisionmakers “do not need to be in a hurry” to cut rates, with consensus suggesting it’s likely to hold off on further cuts until the impact of the Trump administration’s approach to the economy becomes clearer.
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