WASHINGTON—Recent data indicate U.S. inflation eased last month, exhibiting the first deceleration since September, despite ongoing tariffs poised to elevate prices. The consumer price index rose by 2.8% in February compared to the previous year, down from January’s 3%, as reported by the Labor Department. Core inflation, omitting volatile food and energy sectors, expanded by 3.1% from the previous year, marking its lowest point since April 2021.
The declines surpassed economists’ predictions, according to FactSet data. However, inflation remains above the Federal Reserve’s 2% target, and most experts predict continued inflationary pressure as tariffs implemented by the Trump administration take effect. Economist Oren Klachkin described the report as “encouraging,” but he cautioned against assuming the future inflation trajectory, as tariffs may push goods prices higher, increasing inflationary risks.
On a monthly basis, inflation rose less than anticipated, increasing by 0.2% in February from the previous month, a significant drop from January’s 0.5%. Core prices also saw a modest 0.2% rise, underperforming the previous month’s 0.4% hike. Core prices are often closely monitored as they provide insight into future inflation trends.
A notable drop in airline fares by 4% contributed to reduced inflation, along with slower increments in rental prices and costs for hotel rooms and car insurance. Prices for new cars experienced a downturn when compared to January. Meanwhile, grocery prices stabilized, although eggs saw a substantial 10.4% increase from the previous month and are nearly 60% more costly than a year prior. This surge stems from the avian flu impact, which resulted in the culling of over 160 million birds, including 30 million in January. Consequently, February’s average egg price soared to $5.90 per dozen, far above the previous norm under $2 per dozen.
The current influence of Trump’s tariffs on prices remains uncertain, though financial markets have reacted with turmoil, and there are heightened recession concerns. Recently, the U.S. increased import taxes on all steel and aluminum imports to 25%, causing companies reliant on steel to experience cost rises, potentially leading to higher consumer prices for cars, appliances, and electronics. In retaliation, the European Union quickly imposed new tariffs on U.S. industrial and agricultural products in response to the duties on its steel and aluminum.
Additionally, the U.S. imposed 25% tariffs on all imports from Canada and Mexico, with a 10% rate for Canadian oil, although these tariffs are suspended until early April. In a reciprocal move, Canada plans to introduce tariffs totaling $21 billion in U.S. dollars, according to a senior Canadian official. Trump has vowed to impose duties on countries with existing tariffs on U.S. goods by April 2. The Yale Budget Lab estimates these tariffs could propel the average U.S. tariff rate to its highest since 1937, costing households up to $3,400.
Businesses are feeling the pressure. Ethan Frisch, co-CEO of the New York spice company Burlap & Barrel, expressed concern over passing costs to consumers, stating that small businesses can’t absorb these expenses themselves. Performance forecasts for 2025 among major U.S. retailers have been adjusted downwards. Walmart CFO John David Rainey alluded to impending price increases in specific product categories, while Target CEO Brian Cornell anticipated produce price hikes, including Mexican avocados. Best Buy CEO Corie Barry anticipates elevated prices from suppliers, primarily from China and Mexico. At the annual Toy Fair, where nearly 80% of U.S. toys originate from China, industry leaders predicted price increases of 15% to 20% for categories such as games and dolls.