The Federal Reserve’s preferred inflation gauge held steady in February at a 2.5-percent annual increase while “core” prices, which exclude food and energy, jumped up to a 2.8-percent annual increase.

The advance in the headline personal consumption expenditures (PCE) price index was in line with analyst expectations, but the increase in the core came in slightly hotter than expected, adding to inflation concerns.

On a monthly basis, PCE advanced by 0.3 percent while core PCE increased by 0.4 percent.

The staying power of inflationary pressures is concerning for many investors, especially ahead of a widely expected tariff announcement from the Trump administration coming next week.

Trump has announced he will impose new "reciprocal" tariffs on U.S. trading partners by April 2, in addition to import taxes on foreign autos, along with goods from Canada and Mexico.

“While a few months does not make a trend, the recent uptick in inflation ahead of next week’s reciprocal tariffs is concerning, and could pose a problem for [Federal Reserve Chair] Jerome Powell’s rate cut path later this year,” Damian McIntyre, senior analyst with the Federated Hermes investment company, wrote in a commentary.

PCE prices had eased in January to a 2.5-percent annual increase, down from 2.6 percent in December, but increased through the fourth quarter of last year as the Fed was cutting interest rates.

This contributed to the Fed’s decision to pause its cuts starting in January. The Fed maintained its pause earlier this month, leaving interbank lending rates at a range of 4.25 to 4.5 percent.

As inflationary pressures persist and the outlook for growth moderates, concerns about “stagflation” in the economy are becoming more common.

Former Fed economist Claudia Sahm said in a Friday commentary that there was a “whiff of stagflation” in the Fed’ baseline forecast released last week.

“My ‘whiff’ characterization reflects the relatively modest hit to growth and boost to inflation this year, as well as the quick, low-pain return to disinflation next year. These are not stagflation forecasts, but they are a shift,” she wrote.

In its summary of economic projections released earlier this month, the Fed predicted a substantiation reduction in U.S. economic output for this year, bringing down gross domestic product (GDP) for 2025 from 2.1 percent to 1.7 percent.

Central bankers saw PCE inflation increasing from 2.5 percent through the remainder of this year to 2.7 percent.

However, the Fed didn’t adjust the number of interest rate cuts it expects to execute this year, leaving the target for the federal funds rate unchanged at 3.9 percent. That would mean two additional quarter-point rate cuts this year.