U.S. Consumer Prices Expected to Rise in February Amid Oil Price Surge

BY MIRABEL ODETA

U.S. consumer prices are likely to have picked up in February, driven in part by rising gasoline costs as tensions in the Middle East escalated, according to economists. With oil prices surging due to the conflict, further increases in inflation are expected in March, putting renewed focus on price pressures across the economy.

The Labor Department is scheduled to release its Consumer Price Index (CPI) report on Wednesday, which analysts expect will show a moderate increase in underlying price pressures. Despite the uptick, the data is unlikely to influence near-term Federal Reserve policy, with interest rates anticipated to remain unchanged next week.

“The February CPI is likely to show that progress on lowering inflation is stalling out again,” said Sarah House, senior economist at Wells Fargo. She added that while the Middle East conflict began at the end of February, oil and gasoline prices had already started climbing in anticipation of a potential escalation.

Economists surveyed predicted that the CPI rose 0.3% in February, following a 0.2% increase in January, with forecasts ranging from 0.1% to 0.3%. On a year-over-year basis, prices were estimated to have increased 2.4%, consistent with January’s reading, reflecting the fading impact of last year’s high inflation numbers.

Gasoline prices were a major contributor, expected to rise about 0.8% after two consecutive months of decline. Prices at the pump have jumped more than 18% to $3.54 per gallon since the start of the U.S.-Israeli conflict with Iran, according to data from the motorist advocacy group AAA. Oil prices briefly surged above $100 per barrel before easing after comments from President Donald Trump suggesting a rapid end to the conflict.

“The recent 15% move alone suggests a 0.15 to 0.30 percentage point lift to headline inflation depending on how the conflict evolves,” said Andy Schneider, senior U.S. economist at BNP Paribas Securities. He added that sustained higher oil prices could also raise fertilizer and transportation costs, putting upward pressure on food inflation later in the year.

Core inflation, which excludes volatile food and energy prices, was forecast to have risen 0.2% in February, down from 0.3% in January. This moderation was expected to reflect lower used vehicle prices and smaller increases in rents and airline fares. However, goods such as apparel and household furnishings likely experienced stronger price increases, as businesses passed on the costs of tariffs.

The recent CPI report will also show the continued impact of tariffs previously imposed under laws intended for national emergencies, which the U.S. Supreme Court has since struck down. Despite some absorption of these duties by businesses, economists noted that rising input costs make it unlikely that companies will continue to absorb them, signaling potential sustained pass-through to consumer prices. President Trump responded to the ruling by imposing a 10% global tariff, with plans to raise it to 15%.

Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets, highlighted that “input costs continue to escalate, even as the level of tariffs has mostly stabilized,” suggesting that the effect of tariffs on inflation could persist for some time.

For February, the core CPI inflation was forecast to rise 2.5% year-over-year, unchanged from January, reflecting favorable base effects. Economists expect the Consumer Price Index to provide an early indication of broader trends in the Personal Consumption Expenditures (PCE) price index, which is closely monitored by the Federal Reserve for its 2% inflation target. Delayed PCE data for January, set for release on Friday, is expected to show continued solid gains in core inflation.

Lou Crandall, chief economist at Wrightson ICAP, noted that differences in weighting and unexpected strength in producer price indexes for services could create a larger increase in the broader consumption index. He predicted that these factors are likely to result in an upward bias for the core PCE price index in the February data, scheduled for release on April 9.