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.

With concerns running high that President Donald Trump’s tariff policies will aggravate inflation, a report Wednesday could deliver some mildly encouraging news.

The consumer price index for February is forecast to show an increase of 0.3% for a broad array of goods and services across the largest economy in the world. That projection holds both for the all-items measure and the core index that excludes volatile food and energy prices.

On an annual basis, that would put headline inflation at 2.9% and the core reading at 3.2%, both 0.1 percentage point lower than in January.

The good news is those rates represent a continuation of a steady but quite slow drawdown in the inflation rate over the past year. The bad news is that both also are still well above the Federal Reserve’s 2% goal, likely keeping the central bank on hold again when it meets next week.

“We expect broad-based deceleration, with weaker core goods and services,” Morgan Stanley economist Diego Anzoategui said in a note. “Why still elevated? For three reasons: (1) we expect used car prices rise because of past wildfires, (2) according to our analysis, certain goods and services show residual seasonality in February, and (3) we think supply constraints keep airfares inflation elevated in February.”

The big question now is where things head from here.

Trump’s tariff moves have stirred market worries of both rising inflation and slower economic growth. With Fed officials historically more attuned to the inflation side of the dual mandate for price stability and full employment, a prolonged period of high prices could put the Fed on the sidelines for longer.

However, Federal Reserve Chair Jerome Powell and his colleagues have indicated that in their view, tariffs historically have been one-off price increases and not fundamental inflation drivers. If that’s also the case this time, policymakers might look through any price blips from trade policy and continue to lower rates, as markets are projecting this year.

Goldman Sachs economists expect the Fed to stay on hold until policy comes into clearer view, then likely lower the central bank’s benchmark lending rate by a half percentage point later this year.

“We see further disinflation in the pipeline from rebalancing in the auto, housing rental, and labor markets, though we expect offsets from catch-up inflation in healthcare and a boost from an escalation in tariff policy,” the firm said in a note.

The Bureau of Labor Statistics will release the CPI report at 8:30 a.m. ET.