US Inflation Cooled To A Six-Month Low In March, But Tariff Pressures Are Quickly Mounting

• Inflation slowed sharply in March, new data showed Thursday, underscoring the continued strength and resilience of the economy ahead of President Trump’s aggressive trade moves. In any other timeline, such news would stoke optimism that Americans’ cost of living is no longer surging. Instead, Thursday’s Consumer Price Index (CPI) report was likely another example of a ‘what might have been’ for the US economy.
• The latest reading of the Consumer Price Index, which showed inflation sharply cooling to an annual rate of 2.4% in March from 2.8% in February, lands as countries, businesses, markets and consumers grapple with America’s most severe escalation of its tariff rate in more than a century.
• Economists have cautioned that Thursday’s CPI report could very well mark the nadir in inflation this year as Trump’s massive and sweeping tariffs upend global order and make imports and, likely, end-products for consumers markedly more expensive.
• In March, prices fell 0.1% from the month before, a slower pace of growth than the 0.2% gain recorded in February. This marks the first time that prices have fallen on a monthly basis since May 2020. Similarly, core CPI, which strips out food and energy, rose just 0.1% for the month, resulting in a rate of 2.8% for the 12 months ended in March, marking a sharp slowdown from 3.1% in February. Core CPI is at its lowest rate in nearly four years.
• “The decline in core inflation in March will definitely be welcomed by the Fed, particularly as it was evident in both core goods and services components,” Brian Coulton, chief economist at Fitch Ratings, said in commentary Friday. “But we know firms had been sucking in huge amounts of imports in January and February in advance of tariff hikes, so the shock to consumer goods prices from tariff hikes is not reflected yet.”
• That said, while Thursday’s report is one the Federal Reserve would like to see, the central bank might be put in a bind if inflation were to reaccelerate, and growth stagnates. “The Fed remains in a tough spot, caught between a trade war causing tight financial conditions and weight on the economy as inflation takes off,” Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management, said.

(Source: CNN Business)