Inflation eased more than expected in February, but not enough to assuage fears that a new round of tariffs taking hold Wednesday on steel and aluminum imports would escalate a trade war, threatening higher prices in the months to come.

The consumer price index, a key gauge of inflation, showed that prices rose by 2.8 percent in February from a year earlier, driven by price relief from airfares and gas, the Labor Department said Wednesday. That was cooler than the 3 percent annual gain reported for January and an unexpected signal of progress in combating high inflation.

White House press secretary Karoline Leavitt praised the inflation report Wednesday as a sign that “the economy is moving in the right direction.” She said in a statement: “This inflation report, much like last week’s jobs report, is far better than the media predicted and the so-called ‘experts’ expected. When will they learn to stop doubting President Trump?”

The inflation report preceded a new wave of tariffs of 25 percent on steel and aluminum imports, which economists have warned could raise prices and weigh down the economy over the coming months.

The European Union and Canada hit back with counter levies Wednesday, announcing new tariffs on billions of dollars’ worth of products, including bourbon and motorcycles. .

The tariff threats have spurred recession fears, fueling market uncertainty and a broad sell-off over the past couple of weeks. All three major stock market indexes closed Tuesday below their Election Day levels from November. Markets initially jumped after the release of Wednesday’s inflation report, though the Dow Jones Industrial Average later resumed its decline while the S&P500 and Nasdaq posted gains as of midday.

Economists said Wednesday’s report, while unexpectedly positive, comes amid significant headwinds to the economy as the trade war escalates. New tariffs on steel and aluminum, for instance, mean that a one-time decline reported for new vehicle prices last month — after they were flat in January — is unlikely to be repeated in the immediate future.

“It’s a classic head fake,” said Joe Brusuelas, chief economist at RSM. “Going forward, tariffs are going to increase the costs of manufacturing in general and autos in particular.”

On a monthly basis, the index rose just 0.2 percent last month, below economists’ expectations and a drop from a large 0.5 percent increase in January. So-called core inflation, which strips out volatile food and energy prices, also rose just 0.2 percent on a monthly basis, down from a 0.4 percent rise in January. Core prices were up 3.1 percent for the year, an improvement from the prior month. Economists care about this benchmark because it provides a better sense of underlying inflation.

Egg prices shot up another 10.4 percent, as an outbreak of avian influenza continues to spur a nationwide shortage. Egg prices were up nearly 60 percent since February 2024.

The tariff maneuvering has also created new uncertainty over the economic outlook, with Wall Street economists increasing their expectations for a recession. Goldman Sachs, for instance, last week raised its 12-month recession probability to 20 percent, up from 15 percent, and said it could rise again if the White House “remained committed to its policies even in the face of much worse data.”

Indeed, Trump and his advisers have said some short-term pain might be needed to achieve the administration’s long-term ambitions of remaking the U.S. economy.

They have also said their steps to boost oil production could offset higher inflation. That has fueled a growing conviction that Trump will stick by huge new tariffs regardless of the economic fallout.

Trump has not ruled out the possibility of a recession. “There is a period of transition because what we’re doing is very big,” he said in an interview that aired Sunday on Fox News. “What I have to do is build a strong country. You can’t really watch the stock market.”

Trump inherited a solid economy and labor market, but recent data and corporate announcements have presented a gloomy picture going forward. Delta Air Lines said late Monday that domestic demand has softened amid a reduction in consumer and corporate confidence, leading it to slash revenue and earnings estimates for the first quarter. The retailer Kohl’s saw its stock plunge after it said Tuesday that it expects revenue to fall more than expected this year.

There are also signals that households are gloomier about their future finances, which bodes poorly for future spending. The share of households expecting a worse financial situation one year from now rose to 27.4 percent, the highest level since November 2023, according to the Federal Reserve Bank of New York’s consumer expectations survey released Monday.

The situation is a difficult one for the Federal Reserve, which has a mandate for stable prices and full employment. Tariffs could lead to higher inflation, which would normally lead to higher rates. But a trade war could also hurt growth and cause a deterioration in the labor market, which typically leads to lower rates. The Fed might have to choose which threat — inflation or job losses — is more pressing, economists say.

Fed officials, who have long said the road to getting inflation back to their 2 percent target could be bumpy, are already warning about the potential for so-called stagflation, in which the economy experiences stagnant growth coupled with high inflation and unemployment.

“A deterioration of the labor market alongside higher inflation could present difficult choices,” Alberto Musalem, president of the Federal Reserve Bank of St. Louis, said at an economics conference in Washington this month. He signaled it could be difficult for the Fed to lower rates if inflation remains high or if consumer expectations for inflation become “unanchored.”

“The stakes are potentially higher than they would be if inflation were at or below target, and if consumers and businesses had not recently experienced high inflation,” he added.

At their policy meeting next week, Fed officials are widely expected to hold rates steady at a range of 4.25 to 4.5 percent. Federal Reserve Chair Jerome H. Powell has said the central bank can afford to remain cautious as it weighs the new administration’s trade and other policies and their effects on the economy.

“As we parse the incoming information, we are focused on separating the signal from the noise as the outlook evolves,” he said at an event hosted by the University of Chicago’s Booth School of Business on Friday. “We do not need to be in a hurry and are well positioned to wait for greater clarity.”