Consumer prices unexpectedly eased last month despite growing concern about the reemergence of inflation sparked by President Donald Trump’s trade policies.
The Consumer Price Index rose at an annual rate of just 2.4 percent in March, softer than the consensus estimates and well below the 2.8 percent notched in February, the Labor Department said Thursday. On a monthly basis, prices fell due to a sharp decline in the cost of gasoline. And core inflation — which excludes volatile food and energy prices — also came in below expectations at 2.8 percent.
Trump, Vice President JD Vance and other administration officials celebrated the March report as a sign that the president is following through on his campaign pledge to bring down prices. The White House released a statement after the release of the report, saying “America Is Back — But Inflation Is Not.”
Still, the report arrived as a growing number of economic surveys reflect trepidation at the prospect that prices may surge as businesses and consumers brace for higher-cost imports.
“The better-than-expected CPI inflation numbers, both headline and core, are good news for the Federal Reserve and for the economy,” Eugenio Aleman, the chief economist at Raymond James, said in a research note. “However, this is probably going to be the last disinflationary year-over-year print this year as the increase in tariffs starts to affect prices going forward.”
Trump’s decision Wednesday to pause most so-called reciprocal tariffs calmed stock market investors, but economists warn that the escalating trade war with China — along with continued uncertainty around how the administration will navigate dozens of bilateral tariff negotiations — is still widely expected to cause prices to surge.
Federal Reserve Chair Jerome Powell warned last week that tariff-related price increases are likely to be more significant than previously assumed. Federal Reserve Bank of Richmond President Tom Barkin on Wednesday told Axios that he expects tariff-related price spikes to become visible in June.
“The increase in US tariffs on China’s imports will deliver meaningful upward pressure to costs unless supply chains can be diverted to other economies, so inflation risks remain elevated, even after yesterday’s 90-day reprieve to the rest of the world,” Seema Shah, the chief global strategist at Principal Asset Management, said.
Fears of resurgent price spikes and slower economic growth have also stoked consumer inflation expectations. Americans now expect prices to rise by as much as 6.2 percent over the next year, The Conference Board reported last month. Studies conducted by the Federal Reserve Banks of New York and Atlanta suggest that businesses also anticipate prices could increase in the coming months.
The March report may temper those expectations in the coming weeks, but economists and Wall Street analysts are cautioning that it won’t be long before higher import levies — including new tariffs on China that took effect in March — become visible in inflation data.
“If we weren’t on the eve of significant tariff impacts, today’s CPI report would be a welcome sign that inflation is moving in the right direction,” Jason Pride, the chief of investment strategy and research at Glenmede, said Thursday.
