Price growth was set to have cooled slightly in February, forecasters said in advance of the latest Consumer Price Index report, but President Donald Trump’s tariff policies are already threatening to derail things.
The Bureau of Labor Statistics will release its monthly inflation report early Wednesday. A survey of analysts by Dow Jones said a more closely watched inflation measure that strips out more volatile food and energy items was expected to have eased from 0.4% to 0.3% on the month and from 3.3% to 3.2% over the past year.
Economists were looking for the broader CPI measure to slow even further amid falling fuel prices.
Trump entered office promising to reduce prices. Yet most mainstream economists say they believe that is an impossible goal to accomplish — at least in a responsible way — as long as he also insists on implementing tariffs.
On Tuesday, Trump once again doubled down on a tariffs threat, promising to push steel and aluminum duties up to 50% amid Canada’s insistence on charging a 25% surcharge on electricity imports for some U.S. states on its immediate southern border.
Despite all the tariff threats, Trump has implemented only supplemental trade levies on China totaling 20%, plus 25% duties on a handful of goods not covered by the U.S.-Mexico-Canada trade pact.
Yet Trump’s remarks alone have been enough to cause a wave of uncertainty to ripple throughout the U.S. economy, upending spending plans of consumers and businesses alike.
“We have massive cross-currents,” Mark Zandi, chief economist at Moody’s analytics, told NBC News. “We have tariffs that will add to inflation but then a weaker economy that is detracting. My sense is that we’re not going to see further progress toward the [Federal Reserve’s] 2% inflation goal in the near future.”
The United States will be lucky to get back to within half a percentage point of the 2% threshold, he said.
“We’re just not going back” to 2%, he said. “The only reason why we would go back to that target is if the economy really gets nailed here and stalls out — you don’t even need a recession. Inflation could come in, but it would be for the wrong reasons, because the economy is falling apart.”
In its most recent survey of small businesses, released Tuesday, the National Federation of Independent Businesses said the net percentage of owners raising average selling prices rose 10 points from January to a net 32% — the largest monthly increase since April 2021 and the third highest in the survey’s history. The percentage of owners lowering their prices is 10 points lower than it was one year ago. Meanwhile, a net 29% said they planned to raise prices in the next three months, up 3 points from January and the highest reading in 11 months.
“Inflation remains a major problem, ranked second behind the top problem, labor quality,” NFIB Chief Economist Bill Dunkelberg said in the release.
A separate monthly survey of consumer expectations released this week by the New York Federal Reserve found the median inflation expectation increased by 0.1 percentage point at the one-year horizon to 3.1% and remained unchanged at the three-year and five-year horizons, both at 3.0%.
There is still disagreement about whether inflation expectations remain “anchored” and thus how the Federal Reserve is set to respond to ongoing changes in the economy — that is, whether it will keep broad borrowing costs higher or lower. Analysts with Citi expect continued progress on slowing inflation, despite Trump’s rhetoric, and see interest rates falling by as much as 125 basis points, or 1.25%, from their current levels this year.
Others disagree.
“We anticipate [February data] will show the first signs of President Trump’s 10% China tariff hike on core goods, alongside resilient non-shelter services inflation that may stay boosted by residual seasonality effects,” analysts with BNP Paribas financial group said in a note to clients.
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