A Big Inflation Report Is Coming: What to Expect
Key Points
- The consumer price index (CPI) for February is expected to rise by 0.3% across a broad range of goods and services in the U.S. economy.
- This would place headline inflation at 2.9% annually and core inflation at 3.2%, a slight decrease but still above the Federal Reserve’s 2% target.
Inflation and Tariff Concerns
Concerns are mounting that President Donald Trump's tariff policies could exacerbate inflation. Wednesday's CPI report may offer some relief.
The February CPI is projected to increase by 0.3% for both the overall index and the core index (excluding volatile food and energy prices). Annually, this would result in headline inflation at 2.9% and core inflation at 3.2%, each 0.1 percentage point lower than January.
While these figures indicate a gradual slowdown in inflation over the past year, they remain significantly above the Federal Reserve’s 2% target. This is likely to keep the central bank from lowering interest rates when it convenes next week.
Economist Perspectives
Morgan Stanley economist Diego Anzoategui anticipates a broad-based deceleration, particularly in core goods and services. However, he notes factors that could keep inflation elevated, including:
- Rising used car prices due to past wildfires
- Residual seasonality in certain goods and services in February
- Supply constraints affecting airfares
Impact of Tariffs
Trump’s tariff policies have raised concerns about rising inflation and slower economic growth. Historically, the Federal Reserve has focused on maintaining price stability. Prolonged high prices could limit the Fed’s ability to act.
Federal Reserve Chair Jerome Powell and his colleagues have suggested that tariffs typically cause temporary price increases rather than fundamental inflation. If this holds true, policymakers may disregard any short-term price fluctuations due to trade policy and continue to lower rates, as markets anticipate.
Goldman Sachs economists predict the Fed will maintain its current policy until the economic outlook becomes clearer. They anticipate a potential half-percentage point decrease in the benchmark lending rate later in the year, contingent on future developments.
The Bureau of Labor Statistics is scheduled to release the CPI report at 8:30 a.m. ET.
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