The Federal Reserve’s preferred inflation gauge rose 0.4 percent from January to February, the most in a year, according to Bureau of Economic Analysis (BEA) data out Friday. The so-called core personal consumption expenditures (PCE) price index, which excludes food and energy items, was up 2.8 percent from last year, remaining stubbornly above the Fed’s 2 percent target.

The report points to sticky inflation just as President Donald Trump’s planned tariffs risk stoking price pressures even further. His aggressive trade policy—which has tanked sentiment among businesses and consumers—combined with growing signs of household financial stress, has raised concerns that the economy may fall into stagflation or even recession. The Fed’s own forecasts underscore those fears, as policymakers signaled slower growth and faster inflation in fresh projections released at last week’s policy meeting. Chair Jerome Powell downplayed those concerns, even reviving the loaded word “transitory” to describe his expectations for tariff-driven inflation. But some of his colleagues have expressed greater caution.

Officials are holding interest rates steady until they have a better sense of Trump’s policies—particularly his tariffs, ahead of this week’s big rollout, which the president has dubbed “Liberation Day.” While Trump imposed some levies on China last month, they didn’t seem to have much of an impact on price data, as consumer and producer prices both stepped down in February.

Much of the tariff impact to prices would come through goods. A measure of goods inflation that excludes food and energy climbed 0.4 percent for a second month in February, the biggest back-to-back advance since 2022. Core services prices—a closely watched category that excludes housing and energy—rose at a similar pace. But spending on goods did bounce back in February on demand for durable goods like cars—perhaps a sign that some consumers are buying ahead of potential tariffs. Among services, a category that had been a consistent driver of spending growth in recent years, consumers reduced spending on veterinary services, as well as taxis and ridesharing.

“The fact that consumers chose to increase outlays on goods that are about to see price increases at the expense of the far more economically important service sector provides insight into the mindset of the consumer,” Joseph Brusuelas, chief economist at RSM U.S. LLP, said in a note. The modest advance in incomes “does not exactly suggest that the consumer is ready to spend through another round of price shocks.”

Consumer sentiment readings have been dismal of late, although it remains to be seen whether they’re a good predictor of spending. Data out later Friday showed sentiment tumbled this month to a more-than-two-year low, and long-term inflation expectations jumped to a 32-year high, according to the University of Michigan.

The savings rate rose to the highest since June in the PCE report, illustrating a consumer more guarded about finances. Other signs have emerged that Americans are under greater financial strain, including falling behind on car payments and difficulty coming up with funds for emergencies. A slowing job market isn’t helping either. Inflation-adjusted disposable personal income edged up about 0.1 percent for a third month. That measure excludes payments from the government and businesses—BEA cited settlements from a domestic medical device manufacturer and a social media company. Meanwhile, nominal wages and salaries picked up.

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