February inflation dropped to 2.8%, lower than expected, but tariffs could keep prices rising amid consumer concerns.

In Short

In February, inflation decreased to 2.8%, but consumer sentiment fell, and spending dropped, raising concerns about tariffs’ economic impact. Rising egg prices contributed to food inflation, while fears of a recession linger amid cautious consumer behaviour and political divisions regarding inflation.

In February, inflation cooled to 2.8%, below expectations.

Core inflation, excluding food and energy, rose 3.1%, the lowest since 2021, but still above the Federal Reserve’s target.

Following the report, stock markets initially rose but retreated as analysts highlighted ongoing concerns over tariffs and their impact on consumer prices.

Fed policymakers may not respond positively to this inflation report due to uncertainties regarding tariffs.

Consumer sentiment showed a significant decline in February, and spending dropped in January, signalling growing anxiety among consumers.

Prce pressure

Airline fares decreased by 4%, but overall price pressures persist, with concerns that new tariffs could lead to a recession.

Egg prices have surged as a major contributor to food inflation, with the cost of a dozen rising to $5.90.

Despite the cooler inflation numbers, economists caution that future reports could show rising inflation given recent tariff actions.

The likelihood of the Fed making interest rate cuts is diminishing amid ongoing inflationary pressures.

February’s data showed shelter prices easing, although they remain a concern, with significant variances in rent prices across regions.

Consumers are growing cautious about big purchases, responding to uncertainty created by rapid tariff policy changes.

Political divisions are evident in consumer attitudes towards the economy and inflation, with Democrats more concerned about rising costs linked to tariffs.