Inflation held steady in February, according to Fed’s preferred gauge
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(NEW YORK) — Inflation held steady in February compared to a year ago, according to a release from the Federal Reserve’s preferred gauge of price increases.
The reading matched economists’ expectations.
Consumer prices climbed 2.5% in February compared to a year ago, registering at a level slightly higher than the Fed’s target rate of 2%, Commerce Department data on Friday showed.
Core inflation — a closely watched measure that strips out volatile food and energy prices — increased 2.8% over the year ending in February, ticking lower from the previous month, data showed.
The fresh data arrives little more than a week after the Fed opted to leave interest rates unchanged.
Speaking at a press conference after the rate decision, Fed Chair Jerome Powell faulted President Donald Trump’s tariffs for a “good part” of recent inflation. The central bank predicted weaker year-end economic growth and higher inflation than it had in a December forecast.
Consumer surveys show rising fears about inflation as Trump imposes tariffs on top trading partners and key industries.
Economists widely expect tariffs to raise prices because importers typically pass along a share of the tax burden to consumers in the form of higher costs.
Trump announced this week plans to slap 25% tariffs on all imported cars, escalating a global trade war and eliciting criticism from leaders in Canada and Europe. The duties came on the heels of tariffs on steel and aluminum, as well as levies on goods from China, Canada and Mexico.
The Commerce Department data for February covers a period that largely precedes Trump’s tariffs, though the reading arrives amid a bout of accelerating inflation that stretches back to the final months of the Biden administration.
Prince increases fell dramatically from a peak of more than 9% in 2022, but sped up slightly at the end of last year.
This is a developing story. Please check back for updates.
(NEW YORK) — U.S. stocks rallied in early trading on Wednesday, one day after President Donald Trump said tariffs on China would “come down substantially.”
Trump also appeared to soften previous attacks on the Federal Reserve, saying late Tuesday he has “no intention” of firing top central banker Jerome Powell.
The Dow Jones Industrial Average jumped 625 points, or 1.6%, while the S&P 500 climbed 2.5%. The tech-heavy Nasdaq increased 3.4%.
Shares of electric carmaker Tesla surged 6.5% in the first trading since CEO Elon Musk said his time devoted to the Department of Government Efficiency would “drop significantly” next month, paving the way for his return to the company. Still, Tesla shares have fallen by nearly half since a December peak.
Musk described his work at DOGE as necessary, but he said that “working for the government to get the financial house in order is mostly done.”
The uptick also took hold at the other so-called “Magnificent Seven” tech giants, which drove much of the gains in the S&P 500 over recent years.
Facebook parent Meta climbed 5%, while chipmaker Nvidia also increased 5%.
Earlier this month, Trump hiked tariffs on Chinese goods to a total of 145%, prompting China to respond with 125% levies on U.S. products.
The tit-for-tat measures escalated a trade war between the world’s two largest economies, but the White House this week appeared to signal a desire to ease the tensions.
Treasury Secretary Scott Bessent reportedly told a group of investors on Tuesday that “over the very near future, there will be a de-escalation” of the trade war with China. Bloomberg News first reported the remarks.
Bessent’s comments, which came at a private JPMorgan event, sent stocks climbing on Tuesday afternoon. Trump echoed the sentiment hours later.
“145% is very high and it won’t be that high,” Trump told reporters at the White House late Tuesday. “It won’t be anywhere near that high. It’ll come down substantially. But it won’t be zero.”
This is a developing story. Please check back for updates.
The owner of Texas Cafe in Rio Grande City, Texas, Becky Garza, speaks with ABC News’ Mireya Villareal in December 2024. (Mireya Villareal)
(RIO GRANDE CITY, TEXAS) — Emily Williams Knight, president and CEO of the Texas Restaurant Association, represents 58,000 restaurants that employ 1.5 million Texans. That breaks down to 11% of the state’s workforce that could potentially be impacted by the 25% tariffs on Mexican imports that just went into effect.
All Tuesday morning she was on calls and in meetings, calming fears because people believe Texas will feel the brunt of this first — And, after that, the domino effect will be fast.
“Exhausted and afraid: Those are the words I keep hearing from people,” Williams Knight said. “They’re running out of levers to pull here, and they’re afraid. If this is a sustained tariff policy — what that will mean to their business long term? The unpredictability comes with a tremendous cost.”
One of those concerned businesses is Texas Cafe in Rio Grande City, which has been serving South Texas for more than 85 years and was recently certified as a historical landmark by the State of Texas. People travel from all over the country to try their signature dish, Envueltos: A special chile-con-carne filling rolled up in a tortilla. But don’t call it an enchilada or the owner, Becky Garza, will scold you profusely.
“These are my grandfather’s recipes that he invented back in 1939,” she said. “And when you change something, people notice. Especially Hispanic people.”
Garza is getting ready for Cuaresma, or 40 days of Lent. It is essential that she gets very specific ingredients from Mexico for this time of year or her customers will know something isn’t right. Plain and simple: Her business, livelihood and family legacy depend on imports from Mexico that play an essential role in the food she serves. And now, she said, all of that is going to cost more because of the new tariffs.
“I can buy stuff from Mexico cheap and use it in my home. But I can’t use any of those products from Mexico in my business unless I buy them from a store that follows FDA guidelines. I buy Mexican cokes. I get cinnamon sticks. These are a very high-price now and sometimes hard to find. I get pilonsios. Chile guajillo for menudo. And avocados from Mexico are better — the real avocados from Mexico that you can only find in small stores. But boy, they are expensive, and it’s only going to get worse,” Garza explained, adding: “I will not stop getting these items from Mexico, because I don’t want to change the consistency or the quality.”
Garza has seen prices steadily increasing over the last few years. In 2024, she spent around $1,000 for her specialty Cuaresma items. But in 2025, she spent $1,200 — a 20% increase that may not seem like a lot to big retail chains, but is huge for small business owners like Garza.
Knight wholeheartedly agrees, saying, “In the last four years we’ve seen a 35% increase in the cost of food needed in these restaurants and a 36% increase in labor. That’s not even including the big swipe fees businesses are paying, plus the increases to rent and utilities.”
Over the last 30 days, TRA has worked closely with the National Restaurant Association on a strategy to help mitigate the uncertainty. They’ve suggested restaurants review their menus and supply chain, looking for ways to source things closer to their businesses. They’ve also encouraged businesses to keep pushing the value of their service and products. And, before these tariffs went into effect, they reached out to lawmakers to educate them on the impact and push for exemptions.
“It feels like we are in this very unknown space again,” Williams Knight said.
Small, independent businesses make up 70% of the restaurants in Texas.
So, while both big and small establishments will be impacted, Williams Knight said she worries that this will create a ripple effect that could drive some families to close up shop.
She said that some of their restaurants are already starting to get emails from suppliers about costs going up, and she compared the feeling to a few days after the COVID-19 pandemic shutdown was announced, explaining: “You’re going to see a very large number of closures and then a large number of people unemployed.”
For years, as prices have gone up, Garza has found a way to cut back and save so she doesn’t have to charge customers more. In fact, she’s been working a second, primary job that sustains her own day-to-day needs, opting not to take a real paycheck from Texas Cafe. But she’s retiring in June and having to think about her future. And for the first time since she’s taken over the restaurant, Garza made the tough decision on Tuesday to raise prices.
“I had a meeting with my waitress and we’re going up on the breakfast menu due to the high price of eggs,” Garza explained. “I save money and I am frugal. But right now it’s been getting difficult.”
Not wanting to manifest any other difficulties the restaurant may face in the future, she said that’s all she’s willing to do and talk about for now.
However, there are indicators that the tariff policies that went into effect Tuesday may not affect small businesses as extremely as some are predicting, or their customers, for too long.
President Donald Trump’s administration could announce a pathway for tariff relief on Mexican and Canadian goods covered by the North America Free Trade Agreement as soon as Wednesday, according to an interview with Commerce Secretary Howard Lutnick on Fox Business on Tuesday.
ABC News’ Zunaira Zaki contributed to this report.
(WASHINGTON) — President Donald Trump has repeatedly touted a drop in oil prices and borrowing costs as a sign that sweeping new tariffs bode well for the U.S. economy.
Experts who spoke to ABC News largely rejected the notion, saying the trends indicate expectations of an economic slowdown that would diminish energy demand and send money flooding into bonds as safe-haven investments.
A drop in oil prices and borrowing expenses could offset some of the damage caused by a potential downturn, some experts noted, but such relief is unlikely to offset acute economic pain.
“The reason those prices have fallen is not positive,” Dominic Pappalardo, chief multi-asset strategist at Morningstar Investment Management, told ABC News. “Oil prices and Treasury yields fell because there are concerns about economic growth going forward.”
Oil prices plummeted about 15% last week as Trump’s tariff announcement roiled global markets and triggered warnings about a possible recession.
Meanwhile, 10-year Treasury yields last week fell below 4% for the first time in nearly six months. The yield on a 10-year Treasury bond, or the amount paid to a bondholder annually, helps set interest rates for just about any loan, including credit cards and mortgages.
“Oil prices are down, interest rates are down,” Trump said in a post on Truth Social on Monday morning outlining the benefits of his tariff policy.
He repeated the sentiment hours later, boasting of low borrowing costs and predicting the price of a gallon of gasoline would fall to $2.50. The current national average price of a gallon gas is $3.25, according to AAA.
“We have everything down at levels that nobody ever thought possible,” Trump said.
The drop in oil prices and borrowing costs will likely offer some near-term improvements for U.S. consumers, including lower gas prices, experts said.
“Motorists can expect gas prices to begin falling nearly coast-to-coast, with oil now at its lowest level since the early days of the pandemic in 2021,” Patrick de Haan, the head of petroleum analysis at GasBuddy, told ABC News in a statement.
In the case of oil, prices are dropping as forecasters increase the odds of a possible U.S. recession, which would reduce economic activity and slash demand for oil. If appetite for oil falls, the price will too.
“In addition to falling oil prices, the stock market has dropped sharply, and the risk of a recession has increased – raising the likelihood of reduced global energy and oil demand, which is sending prices lower,” de Haan said.
The recent decline in Treasury yields owes to hotter demand rather than a cooling off, experts said.
The price of a bond moves in the opposite direction as its yield, or the amount of interest accrued by a bondholder. In other words, when bond yields go down, bond prices go up. The decline in yields over recent days has resulted from a surge in demand as investors flee stocks and seek out safe-haven assets.
“Risky assets sold off and safe investments like Treasury bonds saw prices increase as Treasury yields fell,” Pappalardo said.
The Trump administration has largely declined to rule out the possibility of a recession. Speaking at the White House last month, Trump said a “little disturbance” may prove necessary to rejuvenate domestic production and reestablish well-paying manufacturing jobs.
On Tuesday, oil prices and Treasury yields ticked up slightly as the Trump administration signaled negotiations with some countries targeted by tariffs.
“Any good news of decreasing the tariffs is going to cause oil and yields to rally,” Derek Horstmeyer, a finance professor at George Mason University’s Costello College of Business, told ABC News. “It improves the economic picture.”
Even after the increases on Tuesday, oil prices and Treasury yields remained well below levels seen last week.
Horstmeyer said the benefits of lower oil prices and borrowing costs may offer consumers a false sense of reassurance.
“Falling oil prices always make people feel good,” Horstmeyer added. “They’re usually seen as bad forward indicators, so it portends what’s to come.”
