U.S. consumer prices increased moderately in February as higher shelter costs were partially offset by cheaper airline fares, giving the Federal Reserve room to keep interest rates unchanged next week while monitoring the economic impact of a trade war.

US consumer price inflation data for February came in slightly below expectations across the board. However, while the Fed does not target this index, price pressures are still too strong to warrant a near-term Fed cut. The data does ease fears of resurgent inflation that resulted from a high January CPI reading.

US inflation slowed more than expected in February, with core inflation posting its smallest gain since 2021 — although the data was gathered before President Trump began to ramp up his tariff wars this month.