Inflation fell for the first time in months, according to a federal report released Wednesday. However, many economists are cautioning that the relief could be short-lived.
The latest Consumer Price Index (CPI) report shows inflation at 2.8% for the 12 months ending in February, marking a slight decrease in price growth. The CPI measures the price changes for a wide range of goods and services, including food, housing, and transportation.
Greg McBride, Chief Financial Analyst at Bankrate, emphasized the significance of the drop. “This month was really the first progress we’d seen towards moving inflation down towards that 2% target,” McBride said.
The Federal Reserve has been aiming for a 2% inflation rate before it considers lowering interest rates. McBride noted, however, that this recent good news may not hold for long. “With tariffs looming, that adds an uptick risk for inflation in the months ahead,” he warned.
The Trump administration recently announced new tariffs on imports from America’s largest trade partners—China, Canada, and Mexico—as well as 25% taxes on all steel and aluminum imports. In response, the European Union imposed retaliatory tariffs on U.S. goods worth up to $28 billion.
Markets were mixed by the close of trading Wednesday, as economists reacted to the ongoing trade tensions.
Mark Zandi, Chief Economist at Moody’s Analytics, cautioned that the U.S. economy may struggle with the impact of the new tariffs. “The economy is strong, came into the year doing very well, but it can’t digest the kind of tariffs that we’re talking about here,” Zandi said.
McBride added that the tariffs could have a direct impact on prices. “If businesses are facing less price competition from foreign competitors, they’re likely to boost prices too,” he explained.
This news comes as the cost of living remains high for many Americans. The report showed that shelter prices, which track housing costs, rose by 0.3% in February.
“The pressure on household budgets has been really unrelenting,” McBride said.
Other rising costs included food, with overall prices increasing by 0.2%. Egg prices saw the largest spike, surging by 10.4% in February. Beef, poultry, fish, and cereal and bakery products also saw price increases.
On a positive note, gas prices fell by 1% last month, providing some relief at the pump.
The latest developments highlight the ongoing challenges for consumers, with inflationary pressures still affecting household budgets. The tariffs and their potential impact on the economy suggest that the road to stabilizing prices may remain bumpy for the foreseeable future.
The tariffs on steel and aluminum mark the first major set of tariffs applied to all countries during Trump’s second term in office, signaling continued trade tensions and uncertainty in global markets.
