Recent inflation data from the U.S. shows positive trends, with the Consumer Price Index (CPI) increasing by 2.8% year-on-year in February, down from 3% in January. Month-over-month growth slowed to 0.2%. The core inflation index also decelerated. Despite these encouraging figures, skepticism about tariff strategies remains among investors. Economists predict that tariffs will eventually raise prices, but current consumer costs have not been significantly affected. Concerns about the economic outlook continue to influence market dynamics.
Positive Inflation Trends in the U.S.
The latest inflation data released on Wednesday from the United States has exceeded expectations, revealing that the initial round of tariffs on Chinese goods has not led to increased consumer costs.
Consumer Price Index Shows Decline
The consumer price index (CPI), which tracks the price changes of a variety of goods and services, recorded a 2.8% increase year-on-year in February, down from 3% in January, as reported by the U.S. Department of Labor.
Month-over-month, the CPI also demonstrated a slowdown, rising by just 0.2%, a decrease from the previous month’s 0.5% growth. Analysts had forecasted a year-on-year increase of 2.9% and a month-on-month rise of 0.3%, according to MarketWatch’s consensus.
Moreover, the core inflation index, which omits the fluctuating prices of food and energy, also showed a deceleration, rising by 0.2% monthly (down from 0.4% in January) and 3.1% annually (compared to 3.3%).
Steve Sosnick from Interactive Brokers remarked, “After several disappointing surprises recently, this is a welcome piece of good news.” He noted that while the stock markets opened positively, there remains a cautious atmosphere due to ongoing government announcements and changes related to tariffs.
Previously, the CPI release had disappointed the market, highlighting an unexpected acceleration in inflation. Following his inauguration on January 20, President Donald Trump had quickly attributed the rise in inflation to his predecessor, Joe Biden.
On Wednesday, Trump’s spokesperson, Karoline Leavitt, expressed her delight over the latest figures: “This release, similar to last week’s employment data, far exceeds the predictions made by the media and self-proclaimed ‘experts.’ When will they realize they should stop underestimating President Trump?”
She further emphasized on X, “Just as he did during his first term, President Trump is effectively lowering costs through extensive deregulation and energy dominance.”
Despite the positive figures, the government has encountered skepticism from investors and businesses regarding the effectiveness and implications of its tariff strategies.
Leavitt urged confidence in the president, asserting that he aims for Americans to experience such a financial surplus that they are unsure of how to spend it.
Most economists and analysts anticipate an increase in prices in the U.S. market as tariffs take effect. According to a report from Pantheon Macroeconomics, “Consumer prices have not yet been impacted” by the initial wave of tariffs on Chinese imports.
The firm highlights that the CPI’s deceleration is largely due to a reduction in airline ticket prices, which fell by 4% month-on-month. They do not foresee a rebound in airfare costs for March, citing a recent dip in consumer confidence that suggests a more restrained approach to spending on non-essential services.
Concerns about the economic landscape are also resulting in decreased oil prices, as noted by Ryan Sweet, an economist at Oxford Economics, who believes this could “partially mitigate the impact of tariffs on product prices.”
According to Sweet, this data is unlikely to influence the Federal Reserve’s decisions, which are expected to remain unchanged until there is greater clarity surrounding tariffs, taxation, and the effects of the Trump administration’s immigration policies on the economy.
Dan North, an economist at Allianz Trade North America, remarked, “This level of uncertainty is, quite frankly, unprecedented… no one has navigated this before.” He anticipates that “the Fed will maintain the status quo next week” following its monetary policy meeting. “The economy continues to perform well, spending is progressing, albeit at a slower rate, and the labor market remains robust, eliminating the need for a rate cut to stimulate growth.”