Price growth was expected to cool slightly in February, forecasters said ahead of the latest consumer price index report, but President Donald Trump’s tariff policies have already threatened to derail things.
The Bureau of Labor Statistics will release its monthly inflation report early on Wednesday. Analyst survey by Dow Jones said it is expected that more closely monitored inflation measures, which stripped off more volatile food and energy items, have been eased from 0.4% of the month to 0.3% and 3.3% in the past year to 3.2%.
Economists were looking for a broader CPI scale to slower further amid the decline in fuel prices.
Trump took office with a promise to lower prices. However, most mainstream economists say they believe that achieving it is an impossible goal, as long as he insists on implementing tariffs.
On Tuesday, Trump once again pledged to double the tariff threat and push the steel and aluminum duties up to 50% amid claims that Canada will charge a 25% extra fee for electricity imports from some US states on its southern border.
Despite all tariff threats, Trump only implements supplementary trade collections in China of 20%, and also implements a 25% obligation on a small number of goods not covered by the US-Canada trade agreement.
But Trump’s remarks were enough to curb consumer and business spending plans and create a wave of uncertainty across the US economy.
Mark Zandy, chief economist at Moody’s Analysis, told NBC News. “We have tariffs added to inflation, but then the weaker economy is undermining. My sense is that we won’t see any further progress towards the (Fed) 2% inflation target in the near future.”
He said the US is lucky to be able to return within half the 2% threshold.
“We’re just not back,” he said. “The only reason we’re going back to that goal is if the economy really nails it here and stalls. There’s no need for even a recession. Inflation can come in, but for the wrong reasons because the economy is crumbling.”
In its latest survey of small businesses released Tuesday, the National Federation of Independent Companies said the net percentage of owners that increased average selling prices from January was the largest monthly increase since April 2021, rising 10 points to 32%, the third highest in the history of the survey. The percentage of owners lowering prices is 10 percentage points lower than a year ago. Meanwhile, the 29% of the net said they planned to raise prices in the next three months, up three points from January, and had their best reading in 11 months.
“Inflation remains a major issue and ranks second in the top issues, labor quality,” said Bill Dunkilberg, chief economist at the NFIB.
Another monthly survey of consumer expectations, released this week by the New York Federal Reserve, found that median inflation rose by 0.1 percentage points over the course of one year to 3.1%, and remained varied at 3.0% on the horizon for three and five years.
There is still disagreement about whether inflation expectations remain “fixed” and therefore how the Federal Reserve will respond to ongoing changes in the economy, namely whether broad borrowing costs will be increased or lowered. City analysts are hoping to continue their slowing progress in inflation despite Trump’s rhetoric, falling 125 basis points (1.25% (1.25%) from current levels this year.
Others disagree.
“We are expected (February data) to show the first signs of President Trump’s 10% Chinese tariff core products and the first signs of resilient non-shelter services inflation that could continue to be boosted by the residual seasonal effects,” an analyst at BNP Paribas Financial Group said in a note to clients.