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.
Economics
Consumer sentiment tumbles in April as inflation fears spike, University of Michigan survey shows
Economics
Fed’s Kashkari says rising bond yields, falling dollar show investors are moving on from the U.S.
Minneapolis Federal Reserve President Neel Kashkari said Friday recent market trends show investors are moving away from the U.S. as the safest place to invest while President Donald Trump’s trade war escalates.
With Treasury yields rising and the U.S. dollar sagging against its global counterparts in recent days, the trends are running counter to what you might normally see, the central bank official said during a CNBC “Squawk Box” interview.
“Normally, when you see big tariff increases, I would have expected the dollar to go up. The fact that the dollar is going down at the same time, I think, lends some more credibility to the story of investor preferences shifting,” Kashkari said.
The 10-year Treasury yield has surged this week after Trump announced his intention to slap a 10% across-the-board tariff against U.S. trading partners and threatened to impose even harsher select levies before backing down Wednesday.
At the same time, the greenback has slumped more 3% against a basket of global currencies, with moves potentially signifying a turn away from safe-haven U.S. assets.
“Investors around the world have viewed America as the best place to invest, and if that’s true, we will have a trade deficit. So now one of the ways that expresses itself is in lower yields across asset classes in America,” Kashkari said. “If the trade deficit is going to go down, it could be that investors are saying, OK, America no longer is the most attractive place in the world to invest, and then you would expect to see bond yields go up.”
Kashkari noted, however, that he is seeing “stresses” but not significant dislocations in market functioning.
Kashkari does not vote this year on the rate-setting Federal Open Market Committee but will vote in 2026. He noted that his focus in the current environment is on keeping inflation expectations anchored, echoing other policymakers’ statements that rates are unlikely to move until there is clearer visibility on fiscal and trade policy.
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