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U.S. inflation slowed last month for the first time since September and a measure of underlying inflation fell to a four-year low, even as 

The consumer price index increased 2.8 percent in February from a year ago, Wednesday’s 

 from the Labor Department showed, down from 3 percent the previous month. Core prices, which exclude the volatile food and energy categories, rose 3.1 percent from a year earlier, down from 3.3 percent in January. The core figure is the lowest since April 2021.

The declines were greater than economists expected, according to a survey by data provider FactSet. Yet inflation remains above the Federal Reserve's 2 percent target. And most economists expect inflation will remain elevated this year as President Donald Trump's tariffs kick in.

The report “is encouraging news, though it doesn’t tell us much about where inflation is headed,” said Oren Klachkin, Nationwide Financial Markets economist, in an email. “With tariffs possibly set to push goods prices higher ... we see inflation risks as tilted to the upside.”

On a monthly basis, inflation also came in much lower than expected. Consumer prices rose 0.2 percent in February from the previous month, down from a big 0.5 percent jump in January. And core prices rose just 0.2 percent, below the 0.4 percent increase in January. Economists watch core prices because they are typically a better guide to inflation's future path.

A sharp drop in air fares, which fell 4 percent just in February from the previous month, helped bring down overall inflation. Rental price increases also slowed and the costs of hotel rooms and car insurance rose much more slowly in February than the previous month. The price of new cars fell last month compared with January.

Grocery prices were unchanged last month from January, bringing some relief to consumers grappling with a 25 percent jump in grocery prices from four years ago. The cost of eggs, however, jumped 10.4 percent in February from the previous month and are nearly 60 percent more expensive than a year ago.

 has forced farmers to slaughter more than 160 million birds, including 30 million in January. Average egg prices hit $5.90 a dozen nationwide in February, a record high. The price had consistently been below $2 a dozen for decades before the disease struck.

How big an impact Trump's tariffs will have on prices remains unclear, for now. The duties have roiled 

 and could sharply slow the economy, and some analysts see the 

On Wednesday, Trump raised U.S. import taxes on all 

steel and aluminum imports to 25 percent each

, and depending on how long they stay in place, they could lift prices for cars, appliances, and electronics. The European Union 

 to the steel and aluminum duties, announcing retaliatory trade action with new tariffs on U.S. industrial and farm products.

The White House has also imposed 25 percent duties on all imports from Canada and Mexico, with a 10 percent rate for oil from Canada. Most of those tariffs have been suspended until early April.

However, Canada will announce retaliatory tariffs that add up to $21 billion in U.S. dollars, according to a senior Canadian government official who spoke on condition of anonymity because they weren’t authorized to speak before the announcement.

 on any country with duties on U.S. exports on April 2. Economists at the Yale Budget Lab 

 that those duties could boost the average U.S. tariff rate to its highest level since 1937, and cost the average household as much as $3,400.

That has sent business owners scrambling.

“It does put a lot of businesses like ours in a tough spot,” said Ethan Frisch, co-CEO of the New York spice company Burlap & Barrel. “We’re going to have to pass along (the cost) to the consumer. We can’t afford to eat that cost ourselves as a small business. And we certainly can’t pass it back to a farmer in central Mexico. So, it’s going to make the product more expensive, which is then in turn going to slow down sales.”

Performance expectations for 2025 have already been moderated by some of the largest U.S. retailers.

Walmart CFO John David Rainey said last month that some product categories will have price increases.

Last week, Target CEO Brian Cornell said produce prices, including Mexican avocados, could rise soon industrywide and prices for other goods are likely to follow. Best Buy’s CEO Corie Barry said she's expecting higher prices from suppliers, with China and Mexico being primary sources for its products.

Tariffs were a big topic at the recent annual Toy Fair as nearly 80% of the toys sold in the U.S. are sourced from China. Price increases of 15 percent to 20 percent are expected on games, dolls, cars, said Greg Ahearn, president and CEO of The Toy Association, said.

The Associated Press

Author

U.S. inflation slowed last month for the first time since September even as additional tariffs on steel and aluminum kicked in Wednesday that could send prices higher.

U.S. inflation cooled last month, though trade war threatens to lift prices

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