US Inflation: Core Prices Remain Stable, Defying Predictions of Increase

Core prices remained unchanged in February, providing some relief amid fears about tariffs, according to the Labor Statistics Bureau on March 13, 2025. The Producer Price Index, a leading indicator of U.S. inflation, showed no gains for the month after a revised 0.6% jump in January, as per seasonally adjusted data. Economists surveyed by Dow Jones had expected a 0.3% increase. Excluding food and energy, the core index fell by 0.1%, against forecasts for a 0.3% rise, marking its first negative reading since July. Prices excluding trade services increased by 0.2%. This report follows an announcement that the Consumer Price Index rose by 0.2% in February, shaping an overall inflation rate of 2.8%, a slight easing compared to January, offering encouraging news as markets worry about the impact of President Donald Trump’s tariffs on costs. While the consumer price index measures what consumers pay at the checkout for goods and services, producer or wholesale prices indicate the final demand prices producers receive for their products. On an annual basis, core producer prices increased by 3.2%, above the Fed’s 2% target but below January’s 3.7% rate. The core index rose by 3.4% in February, reduced by 0.4 percentage points from January. Markets almost entirely predict that the Fed will remain on hold following its two-day policy meeting next Wednesday (March 19, 2025). Policy makers have repeatedly stated they are adopting a cautious approach, particularly regarding Trump’s fiscal and trade policies. Current market expectations suggest the Fed will cut rates next in June, followed by two more quarter-point reductions before year-end. The 0.2% drop in service prices offset the 0.3% rise in goods prices. Two-thirds of the goods increase came from poultry egg prices surging by 53.6%. Egg prices have soared partly due to bird flu hitting supplies, though there are signs of a March retreat as outbreaks slow. On the services side, over 40% of the decline stemmed from a 1.4% reduction in margins for machinery and vehicle wholesale trade.