The Americans, who hoped for a certain relief of inflation, suffered a setback in February, as new data showed that the underlying price pressure was intensified before President Trump's commercial war and the consumers withdraw the expenses.
The price index for personal consumption after moving out of volatile food and energy articles rose by 2.8 percent in February in February, with the annual pace in January, the trade department reported on Friday. On a monthly basis, this “core” prices rose by a further 0.4 percent, higher than the monthly increase in January.
The increase, which more than expected, was driven by a price increase for everyday items, indicating that Mr. Trump's tariffs have a more remarkable effect. Until a few months ago, the goods prices were consistently flat or occasionally negative, which contributed to reducing inflation.
Also in January, the inflation of the core services increased by 0.36 percent. The total inflation was 2.5 percent, a level that is far above the target of the Federal Reserve and has been more or less available since November.
Consumer expenditure for the month rose by 0.4 percent and moved back in January, but no longer forecast the economists. As soon as inflation was adapted, the expenditure only rose by 0.1 percent. The Americans also increased how much money they put aside and the personal savings price rose to 4.6 percent.
“It shows some preliminary signs of a stagflation pressure,” said Gennadiy Goldberg, head of the US installment strategy at TD Securities. “This increases the narrative that growth becomes a bit more slow, even if inflation begins to show some signs that we really get the main load of trade disorders.”
The latest data from the trade department underline the extent of the challenge with which the central bank is faced. The debate about what to do with interest rates was complicated by a rapidly escalating trade war, which has produced extreme uncertainties about the economic prospects.
Josh M. Hirt, Senior US economist at Vanguard, said that a combination of slower expenses and higher savings is a “warning sign” and puts the FED together with a firmer inflation “in a binding”.
On Wednesday, Mr. Trump announced 25 percent tariffs for cars and auto parts that were imported to the USA, and swore to introduce other tariffs next week.
Since the scope and scale of the tariffs are not yet clear and a variety of other guidelines for immigration, taxes and deregulation are still being worked out, the Fed has decided to stand until it receives more clarity about what exactly Mr. Trump will enforce and how consumers and companies will react.
Last week, the Fed voted for the keeping of interest rates in a range of 4.25 percent to 4.5 percent and extended a break that has been available since January. This was followed by a number of cuts at the end of 2024, which reduced the loan costs by one percentage point.
In new forecasts that were published in addition to the tariff decision, most civil servants continued to expect half a percentage point of cuts this year in accordance with the estimates in December. Nevertheless, eight political decision -makers either forecast no additional cuts or just one that indicates an expansion area of views over the political path forward.
Overall, most officers are higher inflation this year and less growth. By the end of 2025, you can expect core inflation to settle around 2.8 percent before falling back to 2.2 percent next year. In the meantime, they predict that growth this year will slow down to 1.7 percent, since unemployment increases to 4.4 percent, a background from which they are essentially available until 2027.
Cultory data already indicate that consumers also affect this result, albeit to a much more extreme extent.
The data of the conference committee published on Tuesday showed that consumers' trust has fallen again this month and has now been at the lowest level since January 2021. A shorter observation income, business and labor market conditions fell to the lowest stand in 12 years and exceeded a level that normally signals a future recession.
Consumers have determined the economic outlook when they increased their expectations of inflation, at least according to a measure published by the University of Michigan.
The data published on Friday, which was published on Friday, rose by 12 percent in March, since expectations of inflation rose in one year of 5 percent, the highest level since November 2022. Over a period of five years, expectations from 3.5 percent in February rose to 4.1 percent in March, which is due to a shift in the estimates of the independent and the Republican.
Jerome H. Powell, the Fed chairman, described this ad last week as a “outlier”, but said that the officials would observe “very, very carefully” that expectations over a longer time horizon had the risk of getting out of control.
Mr. Goldberg, the TD Securities -Analyst, expects the central bank to keep interest rates at least for the next sessions at the current level, restart the cuts in July and finally complete one percentage point from the loan costs by the end of the year.
The longer the officials wait to take a step, the higher the likelihood that you will have to reduce more aggressive in response to a weakening economy because it warned.
“If you wait longer, miss the moment in gold lily to actually lower prices and in the end,” he said.