Inflation In US Rise Less Than Expected Under Trump Administration 2.0: Reports- wna24

Washington: The latest data from the Labor Department’s Bureau of Labor Statistics has revealed that US consumer prices increased less than expected in February under President Donald Trump. As per data, the consumer price index (CPI) rose 0.2% last month after accelerating 0.5% in January. The respite from rising inflation has been widely welcomed in the United States, however, the economists have warned that the improvement is likely temporary, given the backdrop of aggressive tariffs on imports that are expected to raise the costs of most goods in the months ahead.

According to the data released by the Labor Department’s Bureau of Labor Statistics, in the 12 months through February, the CPI increased 2.8% after climbing 3% in January, falling short of economists’ forecasts of a 0.3% gain and a 2.9% year-on-year increase. The news sent US stock index futures soaring, with the S&P 500 E-minis up 79 points, or 1.42%, and the Nasdaq 100 E-minis up 330 points, or 1.7%.

Earlier, following the upward trend in January, Donald Trump had declared that “inflation is back” in February, although he distanced himself from the issue, stating that he had “nothing to do with that”.

Meanwhile, the new CPI report came amid weeks of rising economic pressure, exacerbated by Trump’s stop-and-go tariff announcements. The imposition of a 25 percent tariff on Canadian and Mexican goods, followed by exemptions and pauses, has created uncertainty in economic conditions. The White House’s refusal to rule out a recession has further fuelled anxiety in markets.

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The ongoing trade tensions and tariffs imposed by the Trump administration are expected to have a major impact on inflation in the coming months. The tariffs on goods from China, Canada, and Mexico are likely to raise the costs of most goods, leading to higher prices for consumers. The tariff conflict is concerning, given that the CPI is still running above the Federal Reserve’s 2% target.

“The longer that inflation runs above the Fed’s target, even if it is due to temporary forces like tariffs, the greater the chance that expectations de-anchor to the upside,” warned Stephen Juneau, a US economist at Bank of America Securities. 

The Federal Reserve is expected to keep its benchmark overnight interest rate unchanged in the 4.25%-4.50% range next Wednesday. However, financial markets expect the Fed to resume cutting rates in June due to the deteriorating economic outlook, after pausing in January. The policy rate has been reduced by 100 basis points since September, when the Fed started its easing cycle.

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The central bank hiked the policy rate by 5.25 percentage points in 2022 and 2023 to tame inflation. However, with inflation still above target, the Fed’s monetary policy trajectory remains uncertain.

Following the spurt of tariffs, economists have upgraded their inflation forecasts. Goldman Sachs estimates that the core Personal Consumption Expenditures Price Index will pick up from 2.65% in January to around 3% by December, which is a significant increase from the mid-2% area forecast earlier.

The US central bank is closely watching the inflation data, and any further increases in prices could lead to a re-evaluation of its monetary policy stance. As the trade tensions continue to escalate, one thing is clear that the impact on inflation and the economy will be massive.