【MACRO Alert】An in- depth analysis of the US February CPI report - the complex game between inflatio

The U.S. Bureau of Labor Statistics will release the February Consumer Price Index (CPI) report at 20:30 on Wednesday, March 12. The market generally expects inflation to ease during the month, but price pressures remain higher than Federal Reserve officials expect. After months of stagnation in inflation progress, the impact of new Trump administration policies (such as tariffs and immigration restrictions) has renewed concerns about the prospects for improving inflation.

Analysts believe that the initial impact of tariffs will be seen in the report. Against this backdrop, price pressures are likely to remain high in the short term, and the Fed will keep interest rates unchanged until data shows more improvement. According to FactSet's consensus forecast, economists expect consumer prices to rise 0.3% month-on-month in February, which will reduce the annual inflation rate from 3.0% in January to 2.9%; core inflation, which excludes volatile food and energy prices, is expected to rise 0.3% month-on-month and 3.2% year-on-year.

If these forecasts are accurate, the annual rate of overall CPI inflation will be the first time since early 2023 to fall below the psychologically important 3% mark. Although the specific details of the new tariffs have not yet been determined, analysts said that the pressure of tariffs discussed by the Trump administration has begun to affect the outlook as companies begin to purchase inventory in advance and consumer sentiment has deteriorated.

Goods have been a reliable, consistent force in the pullback in inflation… but now, with the uncertainty around tariffs, were seeing that reverse, he explained, as businesses raise prices or buy inventory ahead of new tariffs. Torres expects prices of new and used vehicles, as well as food and clothing, to rise in February. Goldman economists also expect prices of airfare and communications, which include internet and phone service, to rise. They expect housing prices, which fall into the services category rather than goods, to moderate slightly.

Although President Trump's new tariffs were in their early stages last month and the outlook for future tariffs changes frequently, analysts say their impact may already be showing up in the CPI data. The 25% tariffs on imports from Canada and Mexico, as well as additional tariffs on Chinese goods, could have a significant impact on U.S. consumer prices.

Torres said some businesses, such as auto dealers, have already been preemptively responding to tariffs by raising prices. The impact on inflation is likely to become more pronounced in the coming months as U.S. trade policy becomes clearer. Industries with large import volumes, such as consumer electronics, auto parts and household goods, are likely to see the most immediate price impact. Industry analysts say the tariffs could begin to show up more clearly in inflation data as early as April or May, depending on existing inventory levels and businesses' ability to absorb the costs.

"The February CPI report will likely show some initial impact from tariffs, but this is just the beginning," Wells Fargo economists wrote in a note to clients last week. "These trade frictions combined with existing supply chain complexities, if sustained, could create price pressures that could undermine the Fed's confidence in the trend of inflation retreating and could delay the pace of rate cuts that many market participants have been expecting. With inflation likely to remain elevated, analysts expect Fed officials to keep interest rates unchanged when they meet later this month."

According to the CME FedWatch Tool, the bond futures market expects the Fed to keep interest rates unchanged with a 98% probability . In his speech last Friday, Fed Chairman Powell said that the Trump administration is making policy adjustments in multiple areas such as trade, taxation, government spending, immigration and regulation, adding that the "net effect" of these changes will have an important impact on the economy and the Fed's interest rate policy. Therefore, he said that the Fed is likely to keep its benchmark interest rate unchanged in the coming months, waiting for the widespread "uncertainty" caused by Trump's policies to settle.

Higher-than-expected inflation data could trigger a sharp sell-off in the stock and bond markets as investors readjust their interest rate expectations. Currently, the U.S. stock market is facing a crisis. Trump's tariffs have panicked investors, and concerns about an economic downturn have triggered a stock market sell-off, causing the S&P 500 to evaporate $4 trillion from its high last month. Obviously, U.S. economic news is increasingly disappointing relative to baseline forecasts, which may increase unexpected risks. This is unlikely to be good news for a market plagued by recession fears.