Inflation Cools Slightly But Don’t Take A One-Month Change As A Trend

The new Consumer Price Index — CPI for short — data is out. It shows some slowing, but there is still enough to remain wary. You can bet the Federal Reserve will.

The month-over-month so-called all-items price growth between January and February was 0.2%. Comparing last month to February in 2024, the inflation rate was 2.8%.

The details of different inflation are important. If you didn’t know, the U.S. maintains lists of goods and services consumers typically purchase. Each takes up a percentage of the theoretical shopping basket. Government analysts check prices in many parts of the country monthly to discover the changes. That data becomes the basis for the CPI report.

This is the reason that you might find yourself experiencing price changes that differ from the CPI numbers. You might live in a particularly expensive or inexpensive part of the country. You might face expenditures that are higher or lower than average. Your consumption patterns could also vary from the predetermined mix. Medical bills might be higher or maybe — one can hope — you finally paid off student loans and don’t have any higher education expenses.

To see some of the rates of change, the graph below uses data from the Bureau of Labor Statistics via the Federal Reserve Bank of St. Louis that show how changes in categories like shelter, education, overall inflation, and real (after inflation) median household income can vary.

For anyone paying rent or mortgage on a home, the index for shelter rose 0.3% in February 2025, or 4.2% year-over-year. Gasoline was -1.0% month-over-month or -3.2% year-over-year.

There’s not enough information yet to know where things will ultimately go, largely because President Donald Trump’s tariff strategy is unpredictable and causing businesses and investment markets to fall into volatility, whipping back and forth as they try to determine what might happen next and take appropriate measures. It’s why I recently mentioned that not reacting and not immediately changing your investment plans was probably the wisest move for most people.

The details are important to help focus on what is happening on a broader basis and not necessarily on hype you might read or hear. As an example, take what for many people are vexing egg prices. “The surge in egg prices dominated the inflation headlines last month, but consumers saw offsetting relief in other grocery prices,” Bill Adams, chief economist for Comerica Bank, wrote on Wednesday morning.

The immediate future remains cloudy. “For us, one of the most important takeaways from the report is good prices no longer offered a deflationary offset to services headed into the current bout of trade policy uncertainty,” wrote Nationwide Financial Markets Economist Oren Klachkin in a note Wednesday morning. “With tariffs possibly set to push goods prices higher and services still exerting upward pressure on CPI, we see inflation risks as tilted to the upside.”

As Adams explained, if tariffs do rise in the second half of the year, that would cause imported goods to rise in price and increase costs of service providers who then pass on the additional charges to all consumers. He also said that the job market appears to be weakening “as DOGE, tariff uncertainty, and souring consumer sentiment slow the economy.”

It will likely take a few months to gain some certainty and understand where the economy is headed. In the meantime, people could do worse than to embrace some prudence and frugality.