The core personal consumption expenditures price index showed a 0.4% increase for the month, the biggest monthly gain since January 2024, putting the 12-month inflation rate at 2.8%. Economists surveyed by Dow Jones had been looking for respective numbers of 0.3% and and 2.7%. Core inflation excludes volatile food and energy prices and is generally considered a better indicator of long-term inflation trends. In the all-items measure, the price index rose 0.3% on the month and 2.5% from a year ago, both in line with forecasts. At the same time, the Bureau of Economic Analysis report showed that consumer spending accelerated 0.4% for the month, below the 0.5% forecast. That came as personal income posted a 0.8% rise, against the estimate for 0.4%.

Inflation picked up last month and consumers barely raised their spending, signs that the economy was already cooling even before most tariffs were imposed. Friday’s report from the Commerce Department showed that consumer prices increased 2.5% in February from a year earlier, matching January’s annual pace. Excluding the volatile food and energy categories, core prices rose 2.8% compared with a year ago, higher than January’s figure of 2.7%.

Core inflation excludes volatile food and energy prices and is generally considered a better indicator of long-term inflation trends. In the all-items measure, the price index rose 0.3% on the month and 2.5% from a year ago, both in line with forecasts. At the same time, the Bureau of Economic Analysis report showed that consumer spending accelerated 0.4% for the month, below the 0.5% forecast. Spooked investors sold on the news, with the Dow Jones Industrial Average falling nearly 700 points, or 1.6%.The S&P 500 dropped 1.8% and the Nasdaq 100 slipped 2.4%. The markets have been on a volatile ride over the past month, fueled by apprehensions that President Trump’s policies could usher the economy into an era of elevated inflation and sluggish growth, potentially casting a shadow over the Federal Reserve’s monetary policy path.