Markets Celebrate Softer Inflation, but Fed Will Remain on Pause

Markets Celebrate Softer Inflation, but Fed Will Remain on Pause

Markets breathed a sigh of relief on Wednesday as the latest inflation data showed a notable cooldown in February. But the softer print is unlikely to sway Federal Reserve officials to lower interest rates at their policy meeting next week.

The consumer price index rose just 2.8% year over year in February and the so-called core measure, which excludes food and energy costs, was up 3.1% last month. The readings were softer than consensus forecasts and marked the first deceleration in the inflation data since September.

But the good news, while providing some relief to markets worried about economic uncertainty and the potential for stagflation amid the Trump administration’s tariff increases, is unlikely to push Fed officials to ease monetary policy. Labor conditions and overall economic growth remain stable and inflation is still above the bank’s target of 2%.