Consumer prices rose 2.8% in February compared to a year ago, easing slightly over the first full month under President Donald Trump. The inflation rate cooled more than economists expected, offering welcome news for markets roiled by a global trade war. The S&P 500 and tech-heavy Nasdaq closed higher on Wednesday, preserving early gains in the immediate aftermath of the release of the inflation report.
The Dow Jones Industrial Average closed slightly lower.
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Speaking at the White House later in the morning, Trump touted the inflation report as “very good news.” Price increases slowed from a 3% inflation rate recorded in January, although inflation remains nearly a percentage point higher than the Federal Reserve’s target of 2%. Egg prices, however, a closely watched symbol of price increases, soared 58.8% in February compared to a year ago, accelerating from the previous month.
Bird flu has decimated the egg supply, lifting prices higher.
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The Justice Department has opened an investigation into egg producers to learn if market practices have contributed to the price hikes, according to a source familiar with the matter. Prices dropped for tomatoes, cereal, cupcakes, and cookies over the past year.
Some grocery prices increased faster than the pace of overall inflation, including beef, biscuits, and apples.
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A rise in housing costs accounted for nearly half of the price increases last month, the U.S. Bureau of Labor Statistics said. A decline in the price of airline tickets and gasoline helped offset some of the increased costs, the agency said.
The inflation report arrived hours after the U.S. imposed 25% tariffs on steel and aluminum, prompting near-immediate retaliatory duties from the European Union and marking the latest escalation of trade tensions. Tariffs are widely expected to raise prices for consumers, since importers typically pass along a share of the added cost to shoppers. The stock market has plunged since Trump imposed tariffs on Mexico, Canada, and China, sparking concerns on Wall Street about a potential economic downturn.
Within days, Trump delayed some of the tariffs on Canada and Mexico.
Consumer prices rise slower than expected
The report on Wednesday may soften pressure on the Federal Reserve, which bears responsibility for keeping inflation under control.
Federal Reserve Chair Jerome Powell last week mentioned that the administration’s tariff plan would likely raise prices for U.S. shoppers and retailers. “We’re at a stage where we’re still very uncertain about what will be tariffed, for how long, at what level,” Powell said. “But the likelihood is some of that will find its way.
It will hit the exporters, the importers, the retailers and to some extent consumers.”
On multiple occasions in recent days, the White House declined to rule out a possible recession, saying the tariffs would require a “period of transition.”
A solid, albeit disappointing, jobs report on Friday raised concerns among some observers. Employers hired 151,000 workers last month, falling short of expectations of 170,000 jobs added. The unemployment rate ticked up to 4.1%, which remains a historically low figure.
The fresh round of duties on Chinese goods doubled an initial set of tariffs placed on China last month. A day later, Trump issued a one-month delay for tariffs on auto-related goods from Mexico and Canada. The carve-out expanded soon afterward with an additional one-month pause for goods from Mexico and Canada compliant with the United States-Mexico-Canada Agreement (USMCA), a free trade agreement.
On Tuesday, Trump announced plans to add another 25% tariff on Canadian steel and aluminum, bringing the total to 50%. The move came in response to threats made by Ontario to cut off electricity to parts of the U.S., Trump said. Hours later, Ontario Premier Doug Ford issued a joint statement with U.S. Commerce Secretary Howard Lutnick announcing the suspension of the 25% surcharge on electricity sent to the U.S.
The tariffs slapped on Canada, Mexico, and China are widely expected to increase prices paid by U.S. shoppers, since importers typically pass along a share of the cost of those higher taxes to consumers.
A key gauge of consumer confidence saw its largest monthly drop since August 2021, according to the nonpartisan Conference Board. The share of consumers who expect a recession within the next year surged to a nine-month high, the data showed. A growing portion of consumers believe the job market will worsen, the stock market will fall, and interest rates will rise, the report addePhoto by Shutter Speed on Unsplashd.
Image Credits: Photo by Shutter Speed on Unsplash
