Inflation in the U.S. showed signs of easing last month, with consumer prices rising 2.8% year-over-year in February, down from 3% in January.
While this is a step in the right direction, it may not be enough to reassure businesses, consumers, or Federal Reserve policymakers. Underlying factors, including new tariffs, continue to pose risks that could keep inflation elevated in the months ahead.
The so-called core inflation measure, which excludes food and energy, rose 3.1%, marking the lowest annual increase since 2021. But despite this promising data, Wall Street remains skeptical. Stocks initially jumped on the news but later retreated as analysts pointed out that inflationary pressures persist. Some economists warn that upcoming tariffs and ongoing consumer spending concerns could derail hopes for a sustained downward trend in inflation.
The Tariff Factor: A New Threat to Price Stability
A major wildcard in the inflation debate is the impact of new tariffs. While Wednesday’s report did not fully capture the effects of recent policy changes, many economists believe that tariffs could push prices higher later this year. Goldman Sachs has already raised its forecast for core inflation in the fourth quarter, from 2.4% to 2.9%, largely due to anticipated price increases from import duties.
Concerns are growing that tariffs, combined with broader economic uncertainty, could contribute to a slowdown in consumer spending. The University of Michigan’s consumer sentiment index fell nearly 10% in February, and January saw the largest monthly drop in consumer spending in four years. This could spell trouble for the economy if Americans start pulling back on purchases amid higher costs.
The Real Reason Eggs Are So Expensive
While inflation remains a broad concern, few price spikes have caught consumers’ attention as much as the soaring cost of eggs. Over the past year, egg prices have surged by nearly 59%, with the cost of a dozen grade-A large eggs reaching a record $5.90 in February.
Politicians have been quick to weigh in, with the Trump administration launching a Department of Justice investigation into whether large egg producers have engaged in price manipulation. But while corporate pricing strategies play a role, the primary reason for the sharp rise in egg prices is a devastating outbreak of avian influenza, or bird flu. Since 2022, the virus has wiped out approximately 130 million egg-laying hens, leading to severe supply shortages.
Compounding the issue is the way grocery retailers now price eggs. Historically, stores used eggs as a loss leader, keeping prices low to attract customers who would then buy other products. But with supply constraints, many retailers have shifted their pricing strategy to avoid stockouts, meaning prices remain high even as demand stays strong.
While inflation remains a broad concern, few price spikes have caught consumers’ attention as much as the soaring cost of eggs. Over the past year, egg prices have surged by nearly 59%, with the cost of a dozen grade-A large eggs reaching a record $5.90 in February.
Politicians have been quick to weigh in, with the Trump administration launching a Department of Justice investigation into whether large egg producers have engaged in price manipulation. But while corporate pricing strategies play a role, the primary reason for the sharp rise in egg prices is a devastating outbreak of avian influenza, or bird flu. Since 2022, the virus has wiped out approximately 130 million egg-laying hens, leading to severe supply shortages.
Compounding the issue is the way grocery retailers now price eggs. Historically, stores used eggs as a loss leader, keeping prices low to attract customers who would then buy other products. But with supply constraints, many retailers have shifted their pricing strategy to avoid stockouts, meaning prices remain high even as demand stays strong.
What Comes Next for Inflation and Food Prices?
The outlook for inflation and food prices remains uncertain. While inflation has cooled slightly, the effects of tariffs and ongoing supply disruptions could push prices back up. For eggs in particular, prices are unlikely to stabilize until producers can rebuild their flocks, which remains difficult as bird flu continues to spread. The U.S. government has pledged $1 billion to combat the crisis, but it will take time for those measures to have a meaningful impact.
For consumers, this means continued price volatility and higher costs for staple goods. Whether inflation truly subsides or resurges will depend on a mix of policy decisions, economic trends, and unpredictable external factors, including disease outbreaks and global supply chain issues.
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