Inflation Holds Steady as Energy Risks Build
U.S. inflation came in largely as expected in February, with the Consumer Price Index rising 0.3% for the month and 2.4% year over year. Core inflation increased 0.2% monthly and 2.5% annually, indicating price pressures remain slightly above the Federal Reserve’s 2% target but are not accelerating. Shelter and services costs continued to rise modestly while several goods categories declined, reflecting mixed underlying trends. However, the report was released before the recent surge in oil prices, which could push headline inflation higher in the coming months.
Oil Disruption Pushes Gas Prices Higher
U.S. gas prices have jumped to roughly $3.54 per gallon, the highest level since mid-2024, following supply disruptions tied to the U.S.–Iran conflict. Attacks affecting the Strait of Hormuz, one of the world’s most critical oil shipping routes, sparked a sharp rise in crude prices and the largest oil supply shock in years. While prices remain below the peaks seen after Russia invaded Ukraine in 2022, higher fuel costs could begin filtering through to transportation and consumer goods. The trajectory of gas prices will largely depend on how long supply disruptions persist and whether global oil markets stabilize.
Economic Growth Slows While Inflation Remains Sticky
U.S. economic growth slowed sharply at the end of 2025, with Gross Domestic Product expanding at just a 0.7% annualized pace in the fourth quarter, well below expectations and down from the prior quarter’s 4.4% gain. At the same time, the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures Price Index, rose 0.3% in January and 2.8% from a year earlier. Core PCE inflation increased to 3.1%, suggesting underlying price pressures remain persistent. The combination of slowing growth and elevated inflation is raising concerns about stagflation and may limit the Federal Reserve’s ability to cut rates this year.
As always, Base Wealth Management remains focused on aligning investment strategies with your long-term goals amid evolving market conditions.
