Inflation slowed down unexpectedly in April to 2.3% compared to the year, progressing towards the target of 2% of the federal reserve and the smallest increase since February 2021.
Price growth was to remain stable at 2.4%, but now inflation has cooled for three consecutive months.
The consumer price index increased by 0.2% in April compared to March. An increase of 0.3% was expected after the drop of 0.1% in March.
The basic IPC, which excludes the volatile prices of food and energy, also increased by 0.2% in April compared to March, less than the 0.3% expected but more than the previous increase of 0.1%.
Basic inflation was maintained 2.8% compared to the year in April, as planned.
A recent UBS note predicts that April data mark the start of the impacts of Trump’s prices implemented, and that October would show greater impacts if trade policies were.
The tariff effects have not yet shown much in inflation data. The new vehicle index was unchanged in April after increasing 0.1% in March. Meanwhile, the food index dropped by 0.1%, the first decrease from one month to the next since 2020. The clothes also dropped in April after an increase in March.
The energy index jumped by 0.7% in April compared to March, following a drop of 2.4%. The index dropped 3.7% compared to a year ago.
The growth of the shelter index remained stable, increasing 4% again during the year. It increased by 0.3% during the month after increased by 0.2% in March.
Last week, the members of the Federal Open Market Committee decided to have stable interest rates, as they expect more certainty around the impacts of prices. CME Fedwatch, who shows what merchants think will arrive at interest rates, showed before and after inflation, a 92% report that the rates will be unchanged at the next FOMC’s scheduled meeting in June.
Trump announced what he called “reciprocal” prices on countries around the world on April 2, before taking a break from them for 90 days. A reference base of 10% was in effect, as well as a 145% rate on most imports from China and 25% prices on cars, steel and aluminum. The Trump administration announced a commercial agreement with China on Monday, a key business partner for the United States. The two countries will reduce the rates of 115 percentage points for 90 days. Last week, Trump said the United States and the United Kingdom had a trade agreement. The 10% rate is still in force, but the two countries have negotiated agreements on vehicles, steel and aluminum from the United Kingdom.
Karoline Leavitt, press secretary of the White House, said on Friday that Trump “was engaged in the reference rate of 10%, not only for the United Kingdom but also for its commercial negotiations with all other countries”.
Beichen Lin, the main investment strategist at Russell Investments, said companies have probably made the increase before 10% Trump prices, which could delay their impact on inflation figures.
“If the broad universal price at 10% is not negotiated, we will finally see a punctual increase in price levels, which would also result in a temporary increase in the inflation rate,” said Lin.
Prices could also affect global economic growth and the labor market.
“If the strong increases in the tariffs that have been announced are supported, they are likely to generate an increase in inflation, a slowdown in economic growth and an increase in unemployment,” said the president of the federal reserve Jerome Powell at a press conference on May 7.
Powell said at the press conference that the economy is resilient, with a solid labor market and inflation just above the 2%Fed objective. The real gross domestic product decreased in the first quarter of 2025, the first time since 2022, but a sharp increase in imports that subtract growth contributed to this contraction. Employment growth was better than expected in April, but still indicated a more difficult labor market for the American unemployed.
Powell said Fed policy is “100 basic points less restrictive than last fall. And so we think it leaves us in a good place to wait and see”.
It is a story in development. Please check the updates.
