Finimize - 🧊 Take that, inflation

What’s going on here?

The Federal Reserve (Fed) must’ve been making a wish when the clock struck 11:11, because US consumer prices rose only 0.2% in February from January – their slowest pace in four months.

What does this mean?

February’s slowdown was a welcome relief after January’s 0.5% uptick. And even better, prices came down across a range of goods and services – think airfares, new cars, and groceries – unless you’re counting eggs, which are still auditioning for a place in the luxury goods aisle. Even the cost of housing and related bills, which have been fueling wider inflation for months, rose at a slower pace.

That said, inflation is still above target at 2.8% per year – and wages picked up faster than the central bank might like too. Plus, investors and shoppers alike expect prices to keep ticking higher, especially now that tariffs could increase costs for companies across a ton of industries.

Why should I care?

For markets: Ready, hold… don’t fire.

You might think this inflation data would encourage the Fed to bring out the rate-cutting scissors, with traders expecting three trims this year and the economy showing some cracks. But there’s just too much uncertainty pouring out of the Oval Office to make concrete predictions. So the Fed might prefer to stay in "wait and see" mode for a little longer yet.

The bigger picture: The ’70s called, it wants its stagflation back.

“Stagflation” is the dreaded combination of weak economic growth and high inflation. Yup, the one-two punch that beat up both stocks and bonds back in the 1970s. And if tariffs push up prices right as the economy slows down, we could be in for a repeat. You might want to prepare your portfolio just in case: gold and other commodities stand to weather stagflation relatively well, as do companies with enough pricing power to pass rising costs on to their shoppers.

What’s going on here?

Tariffs on every ounce of steel and aluminum imported into the US came into effect on Wednesday – and, unwilling to accept lopsided levies, Europe and Canada both retaliated.

What does this mean?

The US slapped 25% tariffs on steel and aluminum imports, affecting $150 billion worth of goods from around the world – $20 billion of which comes from Europe and $17 billion from Canada. Now, that twosome is fighting back. Europe will tax $28 billion worth of US imports, including iconic American stuff like bourbon, motorcycles, and peanut butter. Canada, for its part, announced 25% counter-tariffs on over $20 billion worth of American-made items. But it’s everyday folk who could end up footing a chunk of the bill, with businesses likely to pass on as many of those costs as they can.

Why should I care?

For markets: Eurosummer is just around the corner…

American consumers and travelers throw a lot of money into Europe’s economy. Problem is, increasingly pessimistic economic outlooks and a weaker dollar could make them second-guess spending on Aperol spritz and fine leather accessories – not to mention long-haul flights. If they opt for closer-to-home hedonism, industries from airlines to luxury retailers could lose out. That, at a time when Europe’s businesses need all the support they can get.

The bigger picture: Can I get a small fry with that?

It’s not just trade that the US is complicating: a change in tone from the States has been forcing European leaders to rethink their military spending and increase budgets. Plenty of that funding will be handed to the slow-moving, legacy manufacturers that have long dominated the defense industry. But with European governments looking for fast, scalable solutions, this is an opportunity for nimble startups to steal a march. Take Frankenburg Technologies as an example: the Estonian company is using off-the-shelf sensor tech to build low-cost air defense missiles.