February Inflation Expected to Rise as Middle East Tensions Drive Up Gas Prices

Economic analysts predict consumer prices climbed in February as gasoline costs increased due to Middle East conflict concerns. The Consumer Price Index report, set for release Wednesday, may show inflation progress has stalled despite some relief from cheaper used cars and airfares.

WASHINGTON, March 11 – Economic forecasters anticipate that consumer prices rose in February as gasoline expenses climbed amid expectations of intensifying Middle East warfare, with the regional conflict pushing oil costs higher and potentially driving inflation even further upward in March.

The expected Consumer Price Index rise last month would also mirror the ongoing, gradual effects from President Donald Trump’s extensive tariff policies, which he implemented using emergency powers legislation that was later overturned by the Supreme Court.

Wednesday’s inflation data from the Labor Department is predicted to demonstrate that fundamental price pressures grew at a measured pace last month, aided by relatively lower costs for pre-owned vehicles and air travel. The report is not anticipated to influence immediate Federal Reserve policy decisions, as the central bank is expected to maintain current interest rates at next week’s meeting.

“The February CPI is likely to show that progress on lowering inflation is stalling out again,” said Sarah House, a senior economist at Wells Fargo.

“Although the conflict in the Middle East started at the end of February, oil and gasoline prices were already rising last month in anticipation of an escalation,” House said.

Economic projections suggest the CPI rose 0.3% last month following January’s 0.2% gain, according to a Reuters economist survey. Forecasts varied from 0.1% to 0.3% growth. Over the twelve-month period ending in February, the CPI was projected to increase 2.4%, matching January’s rate as last year’s elevated figures fall out of yearly comparisons.

The Federal Reserve monitors Personal Consumption Expenditures price measurements to track progress toward its 2% inflation goal.

Analysts estimated gasoline prices increased approximately 0.8% in the CPI data after two consecutive months of decreases.

Fuel costs have surged more than 18% to $3.54 per gallon since the U.S.-Israeli conflict with Iran began in late February, according to AAA data. Crude oil prices jumped above $100 per barrel before retreating Tuesday following Trump’s comments that the war might conclude soon.

“The recent 15% move alone suggests a 0.15-0.30 percentage point lift to headline inflation depending on how the conflict evolves,” said Andy Schneider, a senior U.S. economist at BNP Paribas Securities.

Food costs likely continued rising at a steady rate, though Schneider noted “a sustained oil price shock would raise fertilizer and transportation costs that could push food inflation higher later in the year.”

Removing volatile food and energy sectors, the CPI was projected to gain 0.2% after January’s 0.3% increase. This core CPI inflation was likely restrained by falling used car prices and smaller increases in housing costs and airline tickets.

However, merchandise prices for clothing and home goods likely rose significantly as companies transferred tariff costs to consumers. January’s Producer Price Index showed expanding profit margins, particularly in clothing, footwear and accessories retail.

While companies have absorbed substantial import duties, economists indicated they were unlikely to continue this practice, pointing to persistently elevated input costs in Institute for Supply Management surveys.

Trump responded to the Supreme Court decision by establishing a 10% worldwide tariff, which he indicated would increase to 15%.

“The trouble is that there is evidence that input costs continue to escalate, even as the level of tariffs has mostly stabilized,” said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets. “The pass-through dynamic could persist for a while.”

Over the year through February, core CPI inflation was forecast to rise 2.5%, matching January’s pace and benefiting from favorable year-over-year comparisons.

Economists cautioned that moderate core CPI figures were unlikely to produce similarly restrained core PCE inflation increases in February. Friday’s delayed January PCE price data is expected to reveal substantial core inflation growth.

“Weighting differences and unexpected strength in PPI service prices are likely to produce a significantly larger increase in the broader consumption index,” said Lou Crandall, chief economist at Wrightson ICAP. “Similar effects are likely to give the core PCE price index an upward bias in the February data due out on April 9.”