Inflation Holds Steady at 2.4% in February

Inflation held steady in February, before the Iran war caused an oil price shock, giving Federal Reserve officials another key data point as they prepare to vote on interest rate policy next week.

Overall prices increased by 2.4% in the 12 months through February 2026, meeting economist expectations and matching the January figure, according to the U.S. Labor Department's consumer price index (CPI) data released on Wednesday.  

Core inflation, which excludes volatile food and energy prices and captures more fundamental inflation, came in at 2.5% annually, in line with expectations and also unchanged from January.

On a monthly basis, headline inflation measuring overall price changes ticked up 0.3%, while core inflation rose 0.2% from the month before.

Realtor.com® senior economist Jake Krimmel says that while the data shows inflation holding steady in the rearview mirror, the economic backdrop has shifted significantly since last month.

"Because this data window closed just as the new 15% global tariff threats were announced and more crucially before the Iran war and resulting oil and trade shock, we should think of this as an inflation floor for the coming months, not a sign of what’s to come," says Krimmel. "Even if the numbers do not yet show it, the economy is likely in a more vulnerable position on the inflation front than in recent months." 

The U.S.-Israeli war with Iran sent oil prices soaring to $119 a barrel over the weekend, the highest since 2022. Oil prices have since fallen back in volatile trading this week, but remain about 30% above pre-war prices.

Gas prices have already surged, hitting $3.58 a gallon nationally on Wednesday, according to AAA. Oil prices also feed into everything from airline fares to groceries, as companies respond to higher fuel and shipping costs.

"If the conflict with Iran is limited in scope and duration, the higher oil prices and higher inflation could be temporary," says BrightMLS Chief Economist Lisa Sturtevant. "Alternatively, if there is a prolonged conflict, there could be a structural shift to higher inflation." 

Fed meets next week as economic uncertainty grows

When Fed policymakers meet next week to vote on interest rate policy, they will likely be more focused on anticipating the impact of an oil shock than the inflation data in the rearview.

The Fed uses higher interest rates to fight inflation and lower rates to boost the job market, in line with the central bank's dual mandate of price stability and maximum employment.

The Federal Open Market Committee is widely expected to keep the Fed's benchmark overnight rate unchanged in the current range of 3.5% to 3.75% in the March 18 vote.

Financial and prediction markets now also expect the Fed to keep rates on hold in April, June, and July as well, pushing forecasts for the next rate cut all the way back to September.

New volatility as spring housing season begins

Krimmel says that for the housing market, the key factor is not the inflation data itself but rather an all-too-familiar sense of volatility and uncertainty.

"A few weeks ago, mortgage rates had fallen to nearly four-year lows, new listings were rising, and pending sales suggested pent-up demand might finally be responding to improved affordability," he says. "Now, it feels we could be headed toward a 2025 redux."

Last year, a promising spring housing season was upended by President Donald Trump's "Liberation Day" tariff announcement, which raised recession fears and increased economic uncertainty.

"Like last spring, geopolitical tensions, supply chain concerns, and rising inflation expectations in bond markets could be enough to stall momentum even if the underlying economy remains resilient," says Krimmel. "As we saw last year, the housing market is particularly sensitive to swings in confidence. Even though today’s inflation data look benign, the question heading into spring is whether renewed uncertainty is enough to sideline buyers and sellers once again in 2026."