Inflation in February: The start of temporary relief or permanent trends?

Inflation that was boring in February for the first time since September by easing gasoline and shelters price pressure.

Inflation reading next month is poised to highlight further advances due to falling energy prices.

Following the latest figures, economic observers wonder whether this trend will continue amid repeated tariffs.

Pump pain has been declining due to falling oil prices.

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This is a positive development for drivers, as crude costs account for around 50% of the price paid by drivers.

The global energy market caters to a variety of developments, including potential peace agreements in Eastern Europe, increased fear of demand, and increased production by the Oil Exporting Countries (OPEC) and its allied organizations.

“The average price of gasoline in the US has not been this low in March since the pandemic has significantly reduced demand and continued to curb prices,” said Patrick de Haan, head of oil analysis at Gasbuddy. “This time we are paying attention to keeping prices down, especially with uncertainty about tariffs.

Price Futures Group energy strategist Phil Flynn has proven to be better than expected, and refiners are switching to winter gasoline blends, which could potentially dissipate later this spring.

“The bottom of the oil should be nearing… and soon refiners need to increase gasoline production,” Flynn said in a daily note. “And generally, it happens at the end of March at the end of April. It should be seen as prices start to rise.”

Shelter inflation has been a thorn on the US side since the onset of the pandemic and has proven to be more sticky than market watchers had expected.

Recent metrics suggest that shelter costs are peaking and may be slipping, but the pace is slowing.

Additionally, median rent growth has been flatlined over the last year. In February, rent rose 0.6% per month to $1,605.

Breakfast enthusiasts paid close attention to the number of eggs bulging in recent CPI data.

Egg prices have been rocking over the past few months. Eggs surged by more than 10% in February, up 59% in the 12 months that ended in February. However, this may be a lagging indicator, as recent USDA data shows egg prices are falling.

Federal Reserve Chairman Jerome Powell reiterated that he and his colleagues were not in a hurry to cut interest rates. For example, at a recent US Monetary Policy Forum event, Powell showed that the Fed is “looking forward to making it clearer” whether it’s tariffs or inflation.

Others say the Fed should be patients before implementing interest rate cuts for the next quarter.

President Jeffrey Schmidt of the Federal Reserve Bank of Kansas City urged monetary authorities to be cautious before addressing weaknesses in the US economy.

Bill Adams, chief economist at Comerica Bank, is projecting a potential, potentially one-quarter point rate reduction in July. Adams said the Fed’s policy path depends on how authorities assess the economic situation.

“If the Fed is looking at current policies alone, they seem likely to not only temporarily raise inflation, but also soften the labour market,” Adams said in an emailed note to the Epoch Times. “It could justify lower interest rates depending on how the Fed pressures the trade-off between inflation and supporting job markets.”

However, if the US Central Bank determines that the slowdown is the result of contracting government policies, monetary policymakers could concentrate on the inflationary side of its dual mission and accept short-term weaknesses in the labour market.

“The scope of the outcome feels wider than usual given the unpredictability of policies affecting prices and job markets,” he added.

At the same time, one of the central bank’s favorite inflation metrics, non-residential services inflation, has soaked at less than 4% for the first time since late 2023. If the supercore expands and slows down inflation and slows down, it could provide a “Fed room to focus on growth orders.”

“We may see some volatility in consumer prices in the near future as businesses and consumers anticipate looming tariffs,” Roach said in a memo sent to the Epoch Times by email.

President Donald Trump’s 25% tariff on steel and aluminum imports came into effect on March 12th. The administration was also poised to implement mutual tariffs on all US trading partners in April.

But while Trump had previously pushed for the Fed to drop immediately, the new administration refrained from repeating these calls. The silence is because the White House already achieves its objective of reducing yields in the US Treasury market.

Rates that are useful for consumers

Following the Fed’s ultra-scale half-point rate cut in September, the Treasury received a spike, with the benchmark 10-year notes above 100 basis points (100 basis points equal to 1%). In 2010, it peaked at 4.8% in mid-January, then fell by about 50 basis points.

This was a positive development for businesses and consumers, especially for future homeowners and drivers.

Mortgage fees track Treasury yields over 10 years.

“The drop in rates should provide a strong incentive to boost the purchasing power of future home buyers and move forward. Furthermore, this drop in rates already offers some homeowners the opportunity to refinance,” Sam Carter, chief economist at Freddie Mac, said in a statement.

“This slight increase shows that more consumers can secure car loans and reflect a slightly more favorable lending environment,” Cox Automotive said in the report. “For consumers, improving access to car credit is a positive development, especially for those with low credit scores.”

Auto loans have recently slipped below 4%, following a five-year financial yield.

Credit card interest rates are slowly slipping, but we expect them to fall significantly as the Fed accelerates its interest rate reduction campaign.

Did the consumer notice?