Illustration: Shoshana Gordon/Axios

February finally brought a bit of inflation relief following a stretch of elevated readings — a sign that the underlying backdrop for the economy is one of diminishing price pressures.

Why it matters: Disinflation returned in February after months of data that appeared to show progress had stalled. But that relief could be fleeting if widening trade wars reignite higher costs.

• This is the conundrum for keeping tabs on the Trump economy. Even quick-turn monthly data like the Consumer Price Index looks stale against a rapidly shifting policy backdrop.
• Still, further tariffs will happen with inflation on a downward trajectory — which beats the alternative.

State of play: The data “confirms that despite the idiosyncratic price bumpiness, economic fundamentals were and remain disinflationary,” EY-Parthenon chief economist Gregory Daco wrote in a note.

• “Looking ahead, however, tariffs, confusion around trade policy and tighter immigration policy mean the risks to inflation are [tilted] to the upside.”

By the numbers: The Consumer Price Index rose 0.2% last month, after a 0.5% spike in January. Over the 12 months through February, CPI rose 2.8% — the lowest since November, when inflation data started to heat up.

• Core CPI, excluding food and energy, rose at a similar monthly pace, with a 3.1% gain in the year ending in February. That was the lowest since the inflation shock took off nearly four years ago.

Between the lines: There was a sliver of good news for consumers in the supermarket. Grocery prices overall were flat last month, especially if you shop anywhere other than the egg aisle.

• Overall food at home prices were flat, and dairy, fruit, and vegetable prices were down.
• That was enough to offset another huge jump in egg prices, which were up 10% in February. Over the past year, prices are up 59%.

The big picture: The Federal Reserve wants proof that inflation is moving “sustainably” lower, as chair Jerome Powell said in a speech last week.

• Inflation remains too high for the Fed’s comfort. Over the last three months, core inflation is up an annualized 3.6%, down a bit from 3.8% in January, but well above its 2% target.

What to watch: The Fed is assessing how White House policy uncertainty will ripple across the economy — including President Trump’s stop-and-start tariff policies that have roiled the stock market and prompted economic growth fears.

• The Fed will likely keep rates on hold when its two-day policy meeting concludes next week.
• Bond yields spiked following the CPI data, and futures now put nearly 60% odds on a rate cut in June, per CME’s FedWatch tool, up slightly from Tuesday. Odds of at least two rate cuts by year-end top 88%.

What they’re saying: “[Wednesday’s] CPI report shows inflation is declining and the economy is moving in the right direction under President Trump,” said White House press secretary Karoline Leavitt in a statement.