Inflation Cools Again — But the Tariff Cloud Hangs
The U.S. inflation rate dropped to 2.3% in April, marking the lowest level since February 2021, according to fresh data from the Bureau of Labor Statistics. The number not only fell from 2.4% in March but also came in slightly below analyst expectations. The core CPI, which strips out food and energy, remained unchanged at 2.8% — still at its lowest since March 2021.
Meanwhile, monthly CPI rose 0.2%, matching March’s pace and below the 0.3% forecast. The core monthly CPI also posted a modest 0.2% increase, indicating subdued price pressure heading into summer.
US inflation cooled slightly in April, suggesting that tariffs haven't yet made their way into consumer prices—or aren’t pushing inflation higher.
— Holger Zschaepitz (@Schuldensuehner) May 13, 2025
Headline CPI came in at 2.3%, down from 2.4% in March and the lowest since Feb2021. It also came in below expectations (consensus was… pic.twitter.com/dPXO7vtswa
US inflation cooled slightly in April, suggesting that tariffs haven't yet made their way into consumer prices—or aren’t pushing inflation higher.
— Holger Zschaepitz (@Schuldensuehner) May 13, 2025
Headline CPI came in at 2.3%, down from 2.4% in March and the lowest since Feb2021. It also came in below expectations (consensus was… pic.twitter.com/dPXO7vtswa
Fed Stands Still — For Now
The inflation data follows the Federal Reserve’s decision last week to hold interest rates steady at 4.25%–4.5%. Fed Chair Jerome Powell acknowledged that while inflation is trending down, the economic picture is more uncertain than ever, especially with Trump’s tariffs back on the table.
Despite the cooler inflation, Powell emphasized the need for cautious, data-driven decisions, reinforcing the Fed’s “wait and see” approach.
Trump’s Trade War 2.0 Could Complicate the Fed’s Plans
President Donald Trump’s aggressive tariff strategy is sending shockwaves through inflation forecasts. On April 2, Trump imposed a 10% blanket tariff, along with:
- 145% on Chinese imports
- 25% on autos, steel, and aluminum
A U.S.-China trade agreement reached this week temporarily slashed some tariffs by 115 percentage points for 90 days, easing immediate pressure. Similarly, the UK trade deal reduced tariffs on British car exports and metals but retained the 10% baseline Trump insists will remain in place across the board.
Experts say this volatility makes it harder for the Fed to predict future inflation trends.
Rate Cuts? Not Just Yet
According to CME FedWatch, there’s a 92% chance rates will remain unchanged in June. However, Barclays and Goldman Sachs have both predicted that rate cuts could come as early as July, especially following a strong jobs report last week.
The broader economic picture is mixed:
- Unemployment remains low at 4.2%
- Q1 GDP declined for the first time since 2022
- Inflation is nearing the Fed’s 2% target
Powell says the Fed's current policy is “100 basis points less attractive than last fall,” meaning there’s room to adjust if needed — but for now, they’re holding the line.
