In a welcome shock that has sent stock futures jumping for joy, the Bureau of Labor Statistics announced that consumer price index inflation dramatically dropped during Donald Trump‘s full first month as president once again. After prices rose by a staggering 0.5% during Joe Biden’s final month of his presidency, headline CPI inflation rose by 0.22% in February, more than a 50% drop that indicates that the inflation rebound Biden oversaw at the end of his term may have been brought to an end.
A major contributor to decelerating inflation? A 1% decrease in gas prices, in no small part due to a dramatic increase in drilling as promised by Trump throughout his campaign. Drilling contractor Baker Hughes reported that the total number of oil and gas rigs operating in the U.S. rose from 477 in November last year to 592 by February, the highest number since June 2024.
Another major factor driving the inflation decelerations was a 4% drop in airline tickets despite overall flight travel increasing relative to February last year. Grocery prices, which rose by 0.5% in January, remained unchanged.
But the real reason stocks are rallying after a bruising week fueled by panic over Trump’s tariff wars is that the Federal Reserve’s preferred inflation measure, core CPI, also beat investor expectations. Annual core CPI inflation, which excludes the volatile categories of food and energy, fell from 3.3% in January to 3.1% in February. On a one-month basis, core CPI rose only 0.23% last month compared to 0.4% in January.
All of these numbers are still far too high, and neither Trump nor the Fed can hardly consider the war on inflation won. Core CPI remains more than 50% higher than the Fed’s maximum 2% target, and the spending categories that make up the most bruising shares of household budgets, such as housing, continue to post inflation numbers more than twice as high as the Fed’s target.
INFLATION FELL TO 2.8% IN FEBRUARY
But after months of Bidenomics pushing inflation back upward in the wrong direction, February’s CPI report indicates that the new administration may have stopped an inflation rebound in its tracks. The February CPI report doesn’t include the $1.20 drop in egg prices reported by the Agriculture Department earlier this March, nor does it include Interior Secretary Doug Burgum’s plans to increase electricity production by 10% to 15%.
But the report also does not include the costs of the escalating tariff war that would be borne by U.S. consumers. Trump can and should count the first inflation report of his second term as a clear point in his favor. He should also remember that markets are rejoicing because he is beginning to fulfill the reason he was elected: to lower the inflation wrought by Bidenomics.