The US annual inflation rate fell slightly to 2.8% in February, down from 3% in January, according to the latest Consumer Price Index (CPI) data released by the Bureau of Labor Statistics. The month-over-month increase was 0.2%, a slowdown from 0.5% in January, providing some relief to consumers and businesses concerned about rising prices.
Core inflation, which excludes volatile food and energy prices, also rose 0.2% month-over-month and stood at 3.1% annually, marking its lowest reading since April 2021.
Inflation trends and key price changes
- Shelter costs increased by 0.3% in February, contributing to nearly half of the CPI rise. However, the annual rate of 4.2% was the lowest since December 2021, signaling potential moderation.
- Energy prices cooled, rising just 0.2% in February compared to 1.1% in January. Gasoline prices declined 1% on the month.
- Food prices saw a modest 0.2% increase, down from 0.5% in January. However, egg prices surged 10.4% due to supply disruptions from an avian flu outbreak, contributing to a 58.8% increase year-over-year.
- Used vehicle prices rose 0.9%, and apparel costs climbed 0.6%, while airline fares dropped 4% in February.
Fed likely to hold rates steady
The Federal Reserve is expected to keep interest rates unchanged at its meeting on 18-19 March, with Chair Jerome Powell recently stating that the economy is stable and does not require immediate intervention.
“The economy’s fine. It doesn’t need us to do anything, really. And so we can wait, and we should wait,” Powell said earlier this month.
Markets have been volatile amid concerns about Donald Trump’s trade policies, which include new 20% tariffs on China and 50% tariffs on Canadian steel and aluminum. The uncertainty has fueled fears of higher costs and a potential recession, with the Dow Jones slipping 6% in the past month.
Mixed market reaction
Following the CPI report, US stock indexes showed mixed performance:
- S&P 500 gained 0.5% as cooling inflation eased concerns over aggressive Fed action.
- Nasdaq Composite rose 1.2%, led by tech stocks.
- Dow Jones Industrial Average dipped 0.2%, reflecting continued investor caution.
Economists remain divided on how inflation will evolve in the coming months, particularly as tariffs and potential supply chain disruptions add to economic uncertainty. However, February’s data suggests inflationary pressures may be easing, giving the Fed more flexibility as it assesses future rate cuts.
