Inflation print calms markets, but tariffs still loom

Commerce Secretary Howard Lutnick said tariffs are “worth it” even if they plunge the US economy into recession territory

article-image

US Secretary of Commerce Howard Lutnick | Joshua Sukoff/Shutterstock modified by Blockworks

share


This is a segment from the Forward Guidance newsletter. To read full editions, subscribe.


After a tough several weeks, today is a happier day on Wall Street. 

February’s inflation print gave stocks a surprising but welcome boost this morning after prices last month rose less than expected. 

The Consumer Price Index showed prices increased 2.8% year over year — still above the Fed’s 2% target but a decline from the 3% annual increase recorded in January. Economists had projected CPI to come in at 2.9% for the 12 months ended February. 

Month over month, consumer prices were up 0.2% in February, a decline from January’s 0.5% gain. That was just under projections, which called for a 0.3% rise last month. Core CPI (excludes volatile food and energy prices) came in at 3.1% annually last month, the lowest yearly increase in almost four years. 

A key sector pushing inflation lower is housing, which historically tends to be one of the more stubborn components of the print. Easing housing costs have significantly contributed to the slowdown in inflation for the past two years.

Non-housing costs, on the other hand, have eased less consistently. While Core inflation is slowing for now, this sector includes goods likely to be impacted by tariffs. Food and energy costs are also expected to rise, especially given Trump’s new tariff plans for steel and aluminum, which experts say will increase OCTG costs by 15% annually.

US equities rallied Wednesday morning on the inflation print. The S&P 500 gained as much as 0.8% while the Nasdaq Composite surged almost 1.5% early in the session. At 2 pm ET they were trading 0.4% and 0.9% higher, respectively. 

Still, fears over an escalating trade war are weighing on markets. By our estimate, the “tariff trade” is the dominant factor contributing to US equity prices right now, even if a positive inflation print provides short-term relief. 

So far, the Fed seems comfortable continuing its interest rate cut pause. Powell last week said the economy is “fine.” 

“It doesn’t need us to do anything,” he added. 

The latest on the tariff front is more retaliatory efforts against the US. Canada hit the US with a 25% levy on steel while the EU announced additional duties on items including denim, bourbon and poultry. 

Companies are faced with two options: Take the loss or charge higher prices. Although if you ask Karoline Leavitt, the latter is out of the question. We’ve written before about how US firms increased their inventories at the start of the year. So it could take some time to see higher prices reflected on consumers, should companies go that route at all. 

Donald Trump has warned Americans of “short-term pain” but has so far refrained from saying just how high the administration’s pain threshold is. We’ve seen cabinet members attempt what I can only describe as damage control in the past, but today they took a different approach entirely. 

Commerce Secretary Howard Lutnick this morning said tariffs are “worth it” even if they plunge the US economy into recession territory. I guess their pain threshold is pretty high. Sounds like a “Trump put” is out of the question.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

Nillion_DeSci_Report_Template.png

Research

Nillion’s Monad Integration is poised to catalyze the next phase of DeSci’s evolution by eliminating key privacy bottlenecks. This synergy allows researchers, institutions, and DAOs to exchange sensitive data and insights securely while managing governance and payments onchain.

article-image

Discounted cash flow is as close as you can get to a fundamental truth in the art of financial valuation

article-image

Solana’s focus remains on fundamentals: stable usage, high yields, and expanding infrastructure

article-image

While new XRP futures ETFs are set to launch, the SEC could wait several months to greenlight more spot offerings

article-image

Bitcoin may have traded like a safe haven asset Wednesday, but analysts warn the trend may not last

article-image

The pixelated game Craft World is set in a post-apocalyptic world where dinosaurs live with humans

article-image

A community-driven, radically fair currency model is challenging Worldcoin’s biometric vision