A softer-than-expected US inflation report provided much-needed relief for investors navigating a rapidly shifting economic landscape.
While uncertainty remains over President Donald Trump’s latest trade policies, February’s inflation data offers reassurance that the US economy remains resilient.
The US consumer price index (CPI) increased by 0.2% in February, bringing the annual inflation rate to 2.8%. Core inflation, which excludes food and energy prices, also rose by 0.2% month-over-month and settled at 3.1% year-over-year—the lowest reading since April 2021. These figures, coming in slightly below expectations, helped steady the financial markets.
Lower inflation is a positive sign for both consumers and investors, as it suggests that price pressures are moderating. More importantly, if this downward trend continues, the Federal Reserve may have more flexibility to adjust interest rates should economic growth slow.
Despite the optimism around inflation, global markets are reacting to Trump’s latest trade moves. On Wednesday, his administration implemented a 25% tariff on steel and aluminum imports, a move aimed at boosting American manufacturing but one that has sparked retaliation from key trade partners. Canada, for example, responded with 25% counter-tariffs on over $20 billion worth of US goods.
Analysts are divided on the long-term effects of Trump’s trade policies. While some fear they could slow global economic growth, others argue they may ultimately encourage fairer trade agreements. Former UK Prime Minister David Cameron, speaking at CNBC’s CONVERGE LIVE event in Singapore, expressed concern over Trump’s approach, while Singapore’s former UN ambassador Kishore Mahbubani suggested a “big trade deal” with China could still be on the horizon.
Despite ongoing trade uncertainty, most US stock indexes closed higher on Wednesday. The S&P 500 rose 0.49%, the Nasdaq jumped 1.22%, and the Dow Jones Industrial Average dipped slightly by 0.2%. Key tech stocks, including Tesla, Nvidia, and Palantir, led the gains.
Former US Treasury Secretary Steven Mnuchin downplayed concerns over market volatility, calling it a “natural, healthy correction” rather than a sign of economic trouble. Meanwhile, oil prices rose by 2.2%, reflecting broader economic dynamics as global markets adjust to shifting trade policies.
