Inflation was slightly lower than expected in April as President Donald Trump’s tariffs began to hit by slower US economy.
The consumer price index, which measures the cost of a wide range of goods and services, rose by a seasonally adjusted 0.2% for the month, bringing the lowest 12-month inflation since February 2021 to 2.3%, the Bureau of Statistics said. Monthly reading was in line with Dow Jones’ consensus estimates, but for 12 months it was a little below the 2.4% forecast.
Excluding unstable food and energy prices, CORE CPI increased by 0.2% that month, but 2.8% year-on-year. The forecasts were 0.3% and 2.8%, respectively.
Monthly measurements were a little higher than in March, but prices continue to rise at the highest level three years ago.
The market has responded very little to the news, but stock futures are flat slightly lower and mixed with Treasury yields.
“‘Good news about inflation. Given the ongoing inflation shock from tariffs, that’s necessary,” said Robert Frick, corporate economist for the Navy Federal Credit Union.
Shelter prices were the main perpetrators who pushed up inflation gauges. According to BLS, about a third of index weighting increased by 0.3% in April and 0.3% in April.
After posting a 2.4% slide in March, the energy price recovered with a profit of 0.7%. Food fell by 0.1%.
In used car prices, the second straight drop, a 0.5% drop, while the new car was flat. Medical services increased by 0.5%, but apparel costs also fell by 0.2%. Health insurance increased by 0.4%, while automobile insurance increased by 0.6%.
Egg prices fell, falling 12.7%, but still up 49.3% from a year ago.
With the increase in CPI, actual average hourly revenues were flat for a month, up 1.4% from a year ago.
Although April’s CPI figures were relatively tame, Trump’s tariffs remain wildcards in inflation pictures, depending on where negotiations are now and summer.
In the much-anticipated “liberation day” announcement, Trump slapped 10% obligations on all US imports and said he intends to put additional “mutual” tariffs on trading partners. However, recently Trump has retreated his position, with the most dramatic development that a 90-day stay on aggressive tariffs on China has both sides in further negotiations.
Economists believe that even if they ease the 145% mutual tariffs on China, they could increase again in the summer months, but the extent to which this happens is an open question. Trump put all the tariffs in place.
“Overall, there were no indications of tariff impact on the April CPI. We expect tariffs will likely rise on core CPIs starting in May, but weakening consumer demand and drawdowns of inventory could reduce inflationary pressures.”
The market expects the president’s soft stance will reduce the likelihood of interest rate reductions this year. Traders were hoping the Federal Reserve would begin easing in June.
Since China’s development, the market has pushed up its initial cuts through September, with central banks having less pressure to support the economy and inflation holding it above the Fed’s 2% target for more than four years, so there could be only two this year.
The Fed relies more on the Commerce Department’s inflation calculations for policy making, although the CPI is in its index. Thursday’s BLS releases April readings at producer prices. This is considered a key indicator of inflation.
