Trade Tensions and Inflation: The Federal Reserve's Dilemma

U.S. consumer prices increased moderately in February due to rising shelter costs, despite cheaper airline fares. Trade war-driven tariffs have inflated consumer expectations and may affect key inflation measures. The CPI rose 0.2%, with shelter costs growing significantly, while airfare and gasoline prices decreased. Economists anticipate further inflation due to tariffs.

U.S. consumer prices saw a moderate rise in February, as increased shelter costs overshadowed the dip in airline fares, offering the Federal Reserve room to pause interest rate changes next week. However, economists indicate that this respite might be short-lived due to looming tariff impacts.

The modest increase in the Consumer Price Index (CPI) was marked by a 0.2% gain, largely driven by shelter costs, which accounted for almost half of the rise. Airline fares decreased by 4.0%, indicating decreased demand, while gasoline and food prices showed varied trends.

Amid ongoing trade tensions, heightened tariffs are expected to further drive up consumer prices. Economists anticipate that inflationary pressures from the trade war could impact future financial stability, potentially prompting the Federal Reserve to resume rate cuts later in the year.

(With inputs from agencies.)