US inflation stayed flat at 2.4% in February, according to government data released Wednesday that provides a snapshot of the US economy before it was thrown into a tailspin by the US-Israel conflict with Iran.
The levelling comes after prices swung last year, reaching a four-year low in April before shooting back up in September. In late fall, inflation crept down again, reaching 2.4% in January.
Core inflation, which doesn’t include the volatile energy and food industries, was 2.5%. The largest price increases were seen in shelter, medical care service and utilities.
Some sectors that rely heavily on imports showed clear signs of impact from Donald Trump’s tariffs. Coffee prices were up 18.4% compared with last year. Prices for canned fruit and vegetables, which use steel and aluminum that is tariffed at 50%, were 6.2% higher, as was the price of furniture and bedding by 4.2%.
Gas prices were actually down 5.2% for the year, a stark contrast to the skyrocketing prices that’s been seen since the start of the US-Israel war on Iran.
Chart of US inflation
Even before the Iran conflict began, Americans were antsy about rising prices with little relief in sight. Polls showed that Americans, especially independents, were souring on the president who once promised to bring down prices but has shaken global trade with his aggressive tariff policies.
The US supreme court struck down much of Trump’s tariff regime last month. He immediately introduced a new 15% tariff on all imports under a different law that skirts the ruling.
The US conflict in Iran has created more uncertainty about prices, triggering oil price shocks around the globe. US gas prices at the pump were just below $3 at the end of February and shot up to $3.50 by 10 March. If prolonged, higher gas prices lead to price increases for other goods. Economists estimate that every $10 increase in the barrel of oil can lead to a 0.2% increase in overall price levels.
On Sunday, Trump said on social media that oil price shocks from the Iran conflict was a “very small price to pay”.
He wrote: “ONLY FOOLS WOULD THINK DIFFERENTLY.”
This new inflation data will play a big role next week at the US Federal Reserve’s board meeting, where officials will decide to make any change to interest rates. Even with the ongoing conflict with Iran, the consensus is that the central bank will hold rates steady for a second time this year.
Price increases have remained stubbornly above the US Federal Reserve’s target rate of 2%. With this persistence in place, most Fed officials have staunchly resisted calls to lower interest rates, at the risk of bumping up inflation even more. But the president has insisted interest rates need to go down, ignoring concerns that lower rates will lead to higher prices and remarks from Fed officials that tariffs have made inflation worse.
The Fed often refers to its “dual mandate”: keeping inflation and unemployment low by manipulating interest rates. Higher interest rates slow the economy but cool prices, while lower interest rates can risk higher inflation.
A tightening in the labor market has put pressure on the other side of the Fed’s dual mandate. Jobs data from February showed the US economy lost 92,000 jobs and the unemployment rate went up to 4.4%.
