The US inflation rate is expected to have remained stubbornly high in February, adding pressure on the Federal Reserve as it navigates economic uncertainty caused by President Donald Trump’s trade war.
Estimates from economists compiled by Bloomberg forecast a 2.9% increase in the Consumer Price Index (CPI) from a year earlier, with a 0.3% monthly gain—slower than January’s 0.5% jump but still concerning for policymakers.
The Bureau of Labor Statistics will release the data on Wednesday, offering fresh insights into inflation trends that have stalled progress toward the Fed’s 2% target.
Rising costs for consumer staples, services such as air travel and hotels, and renewed global trade tensions have fuelled concerns about prolonged price pressures.
Core inflation remains elevated despite easing headline figure
While the overall inflation rate is slightly lower than the previous month’s sharp rise, the “core” inflation measure—which excludes food and energy—remains a key concern.
Economists predict a 0.3% monthly increase and a 3.2% annual rise, suggesting that underlying price pressures are still significant.
The persistent inflationary trend complicates the Fed’s decision-making.
Earlier in the year, officials signalled a wait-and-see approach to interest rate cuts, citing a resilient economy.
However, if growth begins to falter before inflation is fully controlled, the central bank’s ability to act may be constrained.
Price increases in key categories such as housing, transportation, and insurance have kept inflation elevated, despite signs of easing in some goods prices.
Airfare, hotel rates, and auto insurance have continued to climb, adding to the financial burden on consumers.
The latest data suggests that inflation is proving more resistant to the Fed’s tightening measures than initially expected.
Trump’s tariffs add to inflation fears and economic uncertainty
The trade war initiated by President Trump has raised fresh concerns among economists, who worry that tariffs will not only push prices higher but also dampen economic growth.
The latest survey from the Federal Reserve Bank of New York reflects growing unease among consumers, with expectations for inflation at 3.1 percent over the next year.
The share of consumers who expect their financial situation to worsen has also reached its highest level since November 2023.
Trump’s previous trade war in his first term led the Fed to lower interest rates in 2019 to counter economic weakness.
However, the current economic backdrop is different, as inflation has remained above the Fed’s target.
Fed Chair Jerome Powell acknowledged last week that while the central bank typically looks past one-off price shocks from tariffs, it is closely monitoring long-term inflation expectations and economic conditions.
Fed likely to keep rates steady amid market uncertainty
Traders in futures markets are currently pricing in three rate cuts this year, each by a quarter of a percentage point, as fears of slowing growth rise.
However, the Fed’s cautious stance suggests that officials may extend their pause on rate cuts when they meet next week, keeping the current target range at 4.25 to 4.5%.
Powell emphasized that the Fed is in no rush to make decisions, stating that policymakers are “well positioned to wait for greater clarity.”
With inflation showing little sign of rapid decline and trade tensions adding uncertainty, the central bank faces a difficult balancing act in the months ahead.
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