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According to economists, it was slotted in March in March, but was against the backdrop of lower gas prices, but threatens to reverse that downward trend in the coming months.
The consumer price index rose 2.4% in the 12 months that closed in March, down from 2.8% in February, the U.S. Bureau of Labor Statistics reported Thursday, indicating that inflation slowed.
Furthermore, the “core” CPI (a measure that removes potentially volatile food and energy prices) has dropped from 3.1%, the lowest level since March 2021 to 2.8%.
But there are issues like grocery prices, and the Trump administration’s economic policy has led to major headwinds, economists said.
“It must have been a really good day,” Moody’s chief economist Mark Zandy said of the CPI report. “But because of tariffs, trade wars, that means nothing.”
He added that “it does not reflect the tariffs being slapped on products from around the world, especially products that come from China.”
The consumer price index is a widely used measure of inflation that tracks how quickly the prices of a basket of goods and services rise or rise, from haircuts to coffee, clothing and concert tickets.
CPI inflation has dropped significantly from a peak of 9.1% in the June 2022 pandemic era.
However, it exceeds the Federal Reserve goals. The central bank aims to reach an annual rate of approximately 2% over the long term.
Why tariffs increase prices
Taxes, taxes paid by US importers, add to the costs to businesses that are ultimately handed over to consumers, the economist said. For example, steel tariffs could make steel-intensive items, such as cars, homes, and machines, more expensive, they said.
“We are a thrilled man who has been working on the market,” said Thomas Ryan, an economist in capital economics.
President Donald Trump on Wednesday pushed bond prices down as he retreated from imposing sharp tariffs on dozens of trading partners following a stock market defeat and a surge in US government bond yields.
Trump has delayed the so-called “mutual tariffs” for 90 days, but all US trading partners face a universal 10% tariff on all imports. However, Canada, China and Mexico face separate taxes.
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For example, imports from China are subject to 125% tariffs. In response, China has placed an 84% retaliatory tariff on US exports. Trump also imposes product-specific tariffs on aluminum, steel, automobiles and auto parts.
“Many products imported primarily by the US from China. [73%]laptop [78%]video game console [87%]toys [77%]Wendong Zhang, professor of applied economics and policy at Cornell University, also wrote in an email to CNBC.
Trump’s tariff policies will push US inflation to a peak of about 4% by the end of 2025, Capital Economics estimates. This almost doubles the Fed’s long-term goal.
Vanguard Group predicts similar rise in inflation, particularly on commodity prices. Money managers forecast 2025 inflation rate of 4% due to US tariffs and retaliation by other countries.
Economists question whether the effects of inflation are short-lived (similar to a one-off price shock) or more lasting.
Housing Disinflation “Set on Stone”
Preston Caldwell, US economic director for Morningstar, was expected to continue to decline gradually without Trump’s economic policy in 2025.
The trajectory of housing inflation is a major factor in its separation trend, he said.
Shelters are the biggest component of the consumer price index and therefore have a major impact on the direction of inflation. According to BLS, annual shelter inflation was eased to 4% in March, with the lowest increase in 12 months since November 2021.
Caldwell said the excavation of the home was “set at this point on a kind of stone.”
Gasoline prices fall
Gasoline prices also fell in March. According to BLS, pump prices fell 6.3% from February to March, after adjusting for seasonal factors.
Seasonally adjusted prices have fallen by about 10% over the past year.
Oil prices plummeted in early April, leading to fears of crimping demand for the global recession, and gasoline prices are expected to be further curtailed if the trend continues, the economist said.
Grocery is a trouble spot
However, there are still some trouble spots.
Zandi said CPI reports, particularly grocery cooking reports, and food prices in particular, were “severe scars.”
According to BLS data, grocery prices rose 0.5% from February to March, up from 0% last month. This is higher than the monthly movement of around 0.2%, which economists say is necessary to reach the Fed’s annual inflation target.
Egg prices rose about 6% that month, up 60% over the past year, according to BLS data. That jump was primarily due to the US bird flu outbreak, killing millions of egg-selling chickens, overwhelming the egg supply.
Instant coffee prices have also increased by around 13%. Drought-like weather patterns driven by climate change have disrupted major coffee growers like Brazil and reduced coffee bean supply.
However, the significant rise in grocery prices is not due to one factor or produce, Zandi said.
Even if diesel prices drop, it’s “worrisome” that food inflation has recovered. This generally helps to reduce inflation by reducing the cost of transporting grocery shelves.
“There are several highlights in this inflation report, and it continues to have a problem area for food prices and energy components such as electricity and natural gas,” Bankrate Chief Financial Analyst Greg McBride wrote Thursday morning. “But all of this is looking at the rearview mirror. There’s a lot of uncertainty about what’s lurking around Bend, both inflation and the economy as a whole.”
