Inflation cooled more than expected in March despite President Donald Trump’s warnings that he would impose more tariffs.
The consumer price index increased 2.4% from a year prior compared to the forecast of 2.5%. It’s the second straight month of cooling and reflects prices before Trump’s latest trade war escalation.
CPI fell 0.1% over the month after rising 0.2% in February and other monthly increases before it. It was expected to increase 0.1%.
Economists don’t think the slowdown will last, especially after Trump’s newest round of tariffs in April.
“Like the February CPI released last month, any improvement on inflation will be seen as short-lived,” Greg McBride, Bankrate’s chief financial analyst, said.
The new data, along with other coming inflation and jobs reports, will help the Federal Reserve decide in May what to do with interest rates. CME FedWatch, which indicates the chances of changes based on market moves from interest rate traders, shows an over 80% chance the Federal Reserve will hold rates steady once again in May.
Federal Reserve chair Jerome Powell said at the March press conference after Federal Open Market Committee members decided to hold interest rates steady that “a good part” of the unexpected surge in goods inflation in the first two months of 2025 was because of tariffs, partially from consumers and businesses opting to stock up before new duties kick in.
A growing chorus of experts say Trump’s tariffs will cause an economic downturn and possibly even a recession. The Trump administration has instead argued that tariffs are necessary to balance trade deficits and will benefit the US in the long run after some short-term pain.
Meanwhile, the University of Michigan’s sentiment measures tumbled again in March. Markets have swung wildly over the last week as Trump introduced and then partially walked back tariffs.
It’s uncertain how companies will decide to pass costs onto consumers since the latest 10% tariffs on goods from most countries and 125% on imports from China recently went into effect.
“We are likely to see inflationary outcomes, not only on imported goods but on domestic prices, as input costs rise and demand increases on domestic products,” Jamie Dimon, chief executive of JPMorgan Chase, said in his letter to shareholders on Monday, adding that there’s still uncertainty around what the tariffs mean for a recession but economic growth will slow.
This is a developing story. Please check back for updates.
