Inflation Remained Sticky Ahead of Trump’s Escalating Trade War

Americans hoping for some relief on inflation suffered a setback in February, as new data showed underlying price pressures intensifying even before the latest escalation in President Trump’s trade war and consumers pulled back on spending.

The Personal Consumption Expenditures price index, after stripping out volatile food and energy items, climbed 2.8 percent in February from a year earlier, outpacing January’s annual pace, the Commerce Department reported on Friday. On a monthly basis, these “core” prices ticked up another 0.4 percent, higher than the monthly increase in January.

The increase, which was more than what economists had expected, was driven by a rise in prices for everyday items, suggesting Mr. Trump’s tariffs are starting to have a more notable impact. Until a couple of months ago, goods prices were consistently flat or on occasion turned negative, helping to bring inflation down.

Also in January, core services inflation rose 0.36 percent. Overall inflation came in at 2.5 percent, a level that sits well above the Federal Reserve’s 2 percent target and has been more or less in place since November.

Consumer spending for the month rose 0.4 percent, reversing a decline seen in January but falling short of what economists had forecast. Once adjusted for inflation, spending rose only 0.1 percent. Americans also increased how much money they are putting aside, with the personal saving rate rising to 4.6 percent.

“It shows some preliminary signs of stagflationary pressures,” said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities. “This reinforces the narrative that growth may be becoming a little bit more sluggish even as inflation is starting to show some signs of perking up before we really get the brunt of the trade disruptions.”