- The highlights and trends of the most recent US Consumer Price Index (CPI) report.
- The determinants behind the continued softening of the yearly inflation rate.
- The meaning of the inflation trend to monetary policy and economic prognosis.
The CPI And The Fed
The Bureau of Labor Statistics has published the US inflation figures for March 2025. The Consumer Price Index for All Urban Consumers fell 0.1 percent on a seasonally adjusted basis in March, following a 0.2 percent increase in February. The all items index increased 2.4 percent during the last 12 months ending March, following an increase of 2.8 percent during the last 12 months ending February. The United States core inflation rate has reached a 4 year low.
The all items less food and energy or core inflation index increased 0.1 percent in March, after a 0.2 percent hike in February. The all items less food and energy index increased 2.8 percent during the past 12 months, the lowest 12 month advance since March 2021.
The annual inflation rate in the United States eased for a second consecutive month to 2.4% in March 2025, its lowest level since September, down from 2.8% in February, and below forecasts of 2.6%. driven in part by a decline in energy prices.
The United States core inflation rate has hit a 4 year low.
The energy index decreased 3.3% and the food index increased 3%. Compared to the previous month, the CPI decreased 0.1%, the first decline since May 2020, after a 0.2% rise in February and compared to expectations of 0.1%.
The index for energy fell 2.4%, as a 6.3% decline in the index for gasoline more than offset increases in the indexes for electricity and natural gas. The food index, in contrast, rose 0.4% as the food at home index increased 0.5% and the food away from home index rose 0.4%.
Tariffs And Consequences
Meanwhile, tensions are mounting between the US President and the US Federal Reserve. Powell has stressed multiple times that unless data proves otherwise, there would not be a rate cut. Trump, however, presented a strong argument in favor of reducing interest rates. Powell, on the other hand, expressed alarm at rising inflation in an earlier public address after tariffs imposed by Trump were fully implemented.
The March FOMC Meeting minutes also showed that Fed officials were concerned about tariffs and inflation.
The United States China trade war has started. Hours after China raised tariffs on US products to 84%, President Trump quickly increased tariffs on Chinese products to 125%. In a dramatic departure from his previous stance of maintaining historically high tariffs, President Trump has put all reciprocal tariffs on hold for three months, with the exception of China. On Wednesday, the across the board 10% tariff rate will be imposed on all countries that were previously under reciprocal tariff rates.
Consequently, America stock futures rose slightly on Thursday following the major averages recording a historic high as President Donald Trump declared a 90 day halt on most of his new tariffs.
Another implication of the tariff hiatus is that the Fed will reduce interest rates. A tariff delay will not lead to the higher inflation Powell anticipates. A May rate cut, therefore, could become a reality.
They will also closely be monitoring the beginning of possible inflationary effect on tariffs previously introduced since February, such as a 10% tariff imposed on Chinese goods and higher trade levies for foreign steel and aluminum.
There is no April FOMC meeting, so much market activity will be centered around tariffs and earnings reports. Any hope of a rate cut in the May 6 to 7 FOMC meeting has some likelihood now. A rate cut in the June 17, 18 FOMC meeting appears more likely. The summary of economic projections will also be published in the June FOMC meeting.
At the same time, markets are experiencing extremely volatile intraday trading sessions, led primarily by news and events surrounding the tariff war.
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