US inflation was lower than expected in March — despite President Trump’s launch of sweeping tariff wars — but some experts warned that higher prices are likely in the coming months.
The Consumer Price Index rose 2.4% over the past 12 months through March, below expectations of a 2.6% rise and beneath last month’s 2.8% figure, the Bureau of Labor Statistics said Thursday.
Core CPI, which excludes volatile food and energy prices, came in at 2.8% — also below projections of a 3% jump and February’s 3.1% figure, according to the government data. It’s the smallest rise in core inflation since March 2021.
Energy prices led the cooldown, with gasoline prices plunging 6.3% in March, according to the Bureau of Labor Statistics.
Prices for airline fares, car insurance and used cars and trucks also fell, while prices picked up for food, medical care, clothing and new vehicles.
“That was nice, but don’t get used to it,” Greg McBride, Bankrate’s chief financial analyst, said in a note. “Consumers, businesses and even the Federal Reserve are bracing for higher prices in the months ahead.”
“All this is looking in the rear-view mirror. With both inflation and the overall economy, uncertainty abounds about what might be lurking around the bend,” McBride added.
The Dow Jones Industrial Average, S&P 500 and Nasdaq 100 fell 1.6%, 2.1% and 2.3%, respectively, by about 9:30 a.m. ET, after making massive strides on Wednesday — with the Dow soaring nearly 3,000 points — after Trump announced a 90-day pause on nearly all tariffs.
The pause was a welcome reprieve for Wall Street, since panicked investors had led a massive week-long sell-off as they worried the taxes could reheat inflation and even trigger a recession, with the Dow losing nearly 5,000 points.
In March, Trump launched a 20% levy on China and a 25% tax on steel and aluminum imports, and he also halted planned tariffs on Mexico and Canada.
But the latest inflation report does not account for Trump’s so-called “reciprocal” tariffs – a 10% baseline tax on nearly all imports and much harsher rates on many nations – and his recent 90-day pause on them.
“Thursday’s CPI is for March, which is backward looking and doesn’t tell the market much about how the recent tariffs, albeit many of them [are] on pause, are affecting consumer prices,” Skyler Weinand, chief investment officer at Regan Capital, said in a note.
“The next two to three CPI reports over the coming months will take on greater importance,” Weinand added.
Trump made his “Liberation Day” announcement on April 2, so that impact won’t be reflected in the data until next month’s inflation report.
Federal Reserve Chair Jerome Powell, meanwhile, has signaled that the central bank is in “wait-and-see” mode before making any moves to change policy, despite pressure from the president to slash interest rates immediately.
Most recently, Fed minutes from last month’s meeting revealed policymakers are favoring a “cautious approach” that could keep rates higher for longer if inflation persists, or cut rates if the economy shows significant signs of weakening.
But investors started to up their odds of an interest rate cut at the Federal Open Market Committee’s next meeting in May, with 17.5% betting on a quarter-point rate cut, according to CME FedWatch.
Last month, central bankers kept interest rates unchanged in their current 4.25% to 4.5% range as they forecast two rate cuts in the second half of this year.
Credit: Source link
