Consumer prices rose by 2.8% in February compared to the same period last year, marking a slight decline in inflation during President Donald Trump’s first full month in office.

The latest data brought some relief to financial markets, which have been unsettled by an escalating global trade war. The drop in inflation exceeded economists’ expectations, signaling a cooling trend in price pressures.

Following the report’s release, major stock indexes saw an early trading boost on Wednesday, responding positively to the news.

Inflation Trends and Key Price Changes

The latest figures reflect a slowdown from January’s 3% inflation rate, though inflation remains nearly a full percentage point above the Federal Reserve’s 2% target.

One notable exception to the easing trend is egg prices, which surged by 58.8% in February compared to a year ago, an acceleration from the previous month. The spike has been attributed to a severe bird flu outbreak that has disrupted supply chains. In response, the Justice Department has launched an investigation into egg producers to determine whether market practices have contributed to the soaring costs, a source told ABC News.

Meanwhile, prices fell for certain grocery items such as tomatoes, cereal, cupcakes, and cookies. However, some food items, including beef, biscuits, and apples, increased at a rate higher than overall inflation.

Housing costs accounted for nearly half of last month’s price increases, according to the U.S. Bureau of Labor Statistics. A drop in airline ticket prices and gasoline costs helped offset some of these rising expenses.

Trade War and Economic Uncertainty

The inflation report came just hours after the U.S. imposed 25% tariffs on steel and aluminum imports, triggering swift retaliatory measures from the European Union. Economists warn that tariffs often lead to higher consumer prices as importers pass along additional costs to shoppers.

The stock market has been turbulent since Trump introduced new tariffs on goods from Mexico, Canada, and China last week. Wall Street analysts have cautioned that prolonged trade disputes could lead to economic downturns. In response to concerns, the administration has already delayed some tariffs on Canada and Mexico.

Federal Reserve’s Role and Market Reactions

The Federal Reserve, responsible for keeping inflation in check, may face less pressure following the softer inflation figures. However, Fed Chair Jerome Powell recently warned that the administration’s tariff policies could contribute to rising prices for U.S. consumers and retailers.

“We are still uncertain about the scope, duration, and impact of these tariffs, but it is likely that some of the costs will be passed along to consumers,” Powell stated at an economic forum in New York City last week.

The White House has repeatedly refused to rule out the possibility of a recession, describing the tariffs as part of a necessary “transition period.”

Labor Market and Consumer Confidence

Last week’s jobs report added to economic concerns. Employers hired 151,000 workers in February, falling short of expectations of 170,000 jobs. Meanwhile, the unemployment rate edged up to 4.1%, though it remains historically low.

The recent tariffs included a 25% levy on Mexican and Canadian goods, along with a 10% tax on Chinese imports. Within days, Trump postponed certain tariffs on auto-related products from Mexico and Canada. Later, he expanded the delay for goods covered under the United States-Mexico-Canada Agreement (USMCA).

On Tuesday, Trump announced an additional 25% tariff on Canadian steel and aluminum, doubling the previous rate to 50%. The move was reportedly in response to Ontario’s threats to cut electricity exports to the U.S. Shortly after, Ontario Premier Doug Ford and U.S. Commerce Secretary Howard Lutnick released a joint statement announcing the suspension of a planned electricity surcharge.

Consumer Confidence Takes a Hit

The Conference Board, a nonpartisan research group, reported that consumer confidence saw its sharpest monthly decline since August 2021. The survey indicated growing concerns over job stability, stock market performance, and rising interest rates.

As inflation moderates, uncertainty surrounding trade policies and economic stability remains a key issue for consumers, investors, and policymakers alike.

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