Economics
CPI inflation report February 2025:
Prices for goods and services moved up less than expected in February, providing some relief as consumers and businesses worry about the looming impact tariffs might have on inflation, the Bureau of Labor Statistics reported Wednesday.
The consumer price index, a wide-ranging measure of costs across the U.S. economy, ticked up a seasonally adjusted 0.2% for the month, putting the annual inflation rate at 2.8%, according to the Labor Department agency. The all-item CPI had increased 0.5% in January.
Excluding food and energy prices, the core CPI also rose 0.2% on the month and was at 3.1% on a 12-month basis. The core CPI had climbed 0.4% in January.
Economists surveyed by Dow Jones had been looking for 0.3% increases on both headline and core, with respective annual rates of 2.9% and 3.2%, meaning that all of the rates were 0.1 percentage point less than expected.
Stock market futures added to gains after the release while Treasury yields rose. Markets have been highly volatile as the Dow Jones Industrial Average has slipped 6% over the past month.
“A lot of this inflation data does not incorporate what is to come and what already has happened for tariffs,” said Kevin Gordon, senor investment strategist at Charles Schwab. “The vagaries and uncertainties associated with policy are still a much stronger force in the market than anything CPI-related or in terms of one data point.”
Shelter costs moved up 0.3%, less than in January but still responsible for about half the monthly increase in the CPI, the BLS said. The category makes up more than one-third of the total weighting in the CPI, with particular focus on a measure in what homeowners estimate they could get in rent for their properties, which also increased 0.3%.
Food and energy indexes both increased 0.2%. Used vehicle prices jumped 0.9% and apparel rose 0.6%. Within food, egg prices soared another 10.4%, taking the 12-month increase to 58.8% and pushing a broader measure that also includes meat, poultry and fish up 7.7% on the year. Beef prices also climbed 2.4% in February.
Motor vehicle insurance posted a 0.3% increase on the month and was up 11.1% annually. However, airline fares slipped 4% in February and were down 0.7% from a year ago.
Inflation-adjusted average hourly earnings increased 0.1% for the month and were up 1.2% from a year ago, the BLS said in a separate release.
The report comes at a potentially critical juncture for the U.S. economy and financial markets, which have been shaken lately as President Donald Trump escalates a trade war and concerns rise of a growth scare.
In the latest developments, Trump’s 25% duties on steel and aluminum took effect Wednesday, prompting retaliatory measures from the European Union. Trump also has slapped 20% levies on goods from China.
Federal Reserve officials are watching the developments closely. Central bank policymakers generally consider tariffs to have modest impacts on inflation and often are viewed as one-off measures that don’t have lasting impact on longer-term gauges.
However, a broader trade war could change that if the pace of increases becomes more ingrained in the economy. Markets currently expect the Fed to resume cutting interest rates in June, with a total of 0.75 percentage point in reductions by the end of 2025.
“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. “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.”
The Fed meets next week and is widely expected to hold its key borrowing rate in a target range between 4.25%-4.5%.
Economic growth is trending negative in the first quarter, according to the Atlanta Fed’s GDPNow tracker of incoming data. The measure has pegged Q1 growth at a 2.4% decline, which would be the first negative growth quarter in three years.
Inflation barely budged in April as tariffs President Donald Trump implemented in the early part of the month had yet to show up in consumer prices, the Commerce Department reported Friday.
The personal consumption expenditures price index, the Federal Reserve’s key inflation measure, increased just 0.1% for the month, putting the annual inflation rate at 2.1%. The monthly reading was in line with the Dow Jones consensus forecast while the annual level was 0.1 percentage point lower.
Excluding food and energy, the core reading that tends to get even greater focus from Fed policymakers showed readings of 0.1% and 2.5%, against respective estimates of 0.1% and 2.6%.
Consumer spending, though, slowed sharply for the month, posting just a 0.2% increase, in line with the consensus but slower than the 0.7% rate in March. A more cautious consumer mood also was reflected in the personal savings rate, which jumped to 4.9%, up from 0.6 percentage point in March to the highest level in nearly a year.
Personal income surged 0.8%, a slight increase from the prior month but well ahead of the forecast for 0.3%.
Markets showed little reaction to the news, with stock futures continuing to point lower and Treasury yields mixed.
People shop at a grocery store in Brooklyn on May 13, 2025 in New York City.
Spencer Platt | Getty Images
Trump has been pushing the Fed to lower its key interest rate as inflation has continued to gravitate back to the central bank’s 2% target. However, policymakers have been hesitant to move as they await the longer-term impacts of the president’s trade policy.
On Thursday, Trump and Fed Chair Jerome Powell held their first face-to-face meeting since the president started his second term. However, a Fed statement indicated the future path of monetary policy was not discussed and stressed that decisions would be made free of political considerations.
Trump slapped across-the-board 10% duties on all U.S. imports, part of an effort to even out a trading landscape in which the U.S. ran a record $140.5 billion deficit in March. In addition to the general tariffs, Trump launched selective reciprocal tariffs much higher than the 10% general charge.
Since then, though, Trump has backed off the more severe tariffs in favor of a 90-day negotiating period with the affected countries. Earlier this week, an international court struck down the tariffs, saying Trump exceeded his authority and didn’t prove that national security was threatened by the trade issues.
Then in the latest installment of the drama, an appeals court allowed a White House effort for a temporary stay of the order from the U.S. Court of International Trade.
Economists worry that tariffs could spark another round of inflation, though the historical record shows that their impact is often minimal.
At their policy meeting earlier this month, Fed officials also expressed worry about potential tariff inflation, particularly at a time when concerns are rising about the labor market. Higher prices and slower economic growth can yield stagflation, a phenomenon the U.S. hasn’t seen since the early 1980s.
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