The consumer price index fell in March, but President Donald Trump's tariff agenda and the specter of a global trade war threaten to reverse progress.
The annual consumer price index fell to 2.4% in March, down from 2.8% in February, according to the Bureau of Labor Statistics. President Donald Trump 's tariff agenda and the prospect of a global trade war threaten to reverse progress in coming months.
rose 2.4% for the 12 months ended in March, down from 2.8% in February, the U.S. Bureau of Labor Statistics reported Thursday, indicating that inflation decelerated. Additionally, "core" CPI — a measure that strips out food and energy prices, which can be volatile — fell from 3.1% to 2.8%, the lowest level since March 2021. Economists prefer to look at core inflation to determine underlying inflation trends. However, there are trouble spots like grocery prices and the Trump administration's economic policy poses a significant headwind, economists said. "It would have been a really good day," Mark Zandi, chief economist at Moody's, said of the CPI report. "But because of the tariffs, the trade war, it means nothing." He added that "it doesn't reflect any of the tariffs being slapped on products around the world, particularly those coming from China." The consumer price index is a widely used measure of inflation that tracks how quickly prices rise or fall for a basket of goods and services, from haircuts to coffee, clothing and concert tickets.However, it remains above the Federal Reserve's target. The central bank aims for an annual rate around 2% over the long term.Tariffs "are going to be the main driver of inflation surging this year," said Thomas Ryan, an economist at Capital Economics. While Trump delayed so-called "reciprocal tariffs" for 90 days, all U.S. trading partners still face a 10% universal tariff on all imports. The exceptions — Canada, China and Mexico — face separate levies, however.Imports from China are subject to a 125% tariff, for example. In response, China put 84% retaliatory tariffs on U.S. exports. Trump has also imposed product-specific tariffs on aluminum, steel, and automobiles and car parts. "Many products that the U.S. imports are predominantly from China. Smartphones , laptops , video game consoles , toys , and also antibiotics for U.S. livestock production," Wendong Zhang, professor of applied economics and policy at Cornell University, wrote in an e-mail to CNBC. "Resourcing from other countries will take time and result in much higher costs." Trump's tariff policy will push the U.S. inflation rate to a peak around 4% by the end of 2025, Capital Economics estimates. That's roughly double the Fed's long-term target. Vanguard Group projects a similar rise in inflation, particularly for goods prices. The money manager forecasts a 4% full-year 2025 inflation rate due to U.S. tariffs and retaliation by other nations.Inflation was expected to continue its gradual decline in 2025 absent Trump's economic policy, said Preston Caldwell, chief U.S. economist at Morningstar.Shelter is the largest component of the consumer price index, and therefore has an outsized impact on the direction of inflation. Annual shelter inflation eased to 4% in March, the smallest 12-month increase since November 2021, according to the BLS.Gasoline prices also tumbled in March. Prices at the pump declined 6.3% from February to March, after an adjustment for seasonal factors, according to the BLS.in early April, tied to fears of a global recession crimping demand, and gasoline prices are expected to throttle back further if the trend continues, economists said. Food prices were "the significant blemish" in the CPI report, particularly those for groceries, Zandi said. According to BLS data, grocery prices rose 0.5% in the month from February to March, up from 0% the prior month, which is higher than the roughly 0.2% monthly move that economists say is needed to reach the Fed's annual inflation target. Egg prices jumped about 6% for the month and are up 60% in the past year, according to BLS data. That jump is largely attributable to a U.S. outbreak of bird flu, which has killed millions of egg-laying chickens andHowever, the broad increase in grocery prices isn't attributable to one factor or agricultural product, Zandi said. It's "worrisome" that food inflation has picked up even as diesel prices have fallen, a dynamic that would generally serve to hold down inflation due to lower transportation costs to grocery shelves, Zandi said. "This inflation report had some highlights, and continues to have problem areas in food prices and energy components like electricity and natural gas," Greg McBride, chief financial analyst at Bankrate, wrote Thursday morning. "But all this is looking in the rear-view mirror. With both inflation and the overall economy, uncertainty abounds about what might be lurking around the bend."
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