Updated at 8:57 AM EDT
U.S. consumer inflation eased notably last month, data indicated Thursday, in what could be an outlier report on price pressures as sweeping tariffs on goods imported from America’s biggest trading partners begin to seep into the economy.
The Commerce Department said its headline Consumer Price Index for March was pegged at an annual rate of 2.4%, down from the 2.5% pace recorded in February and inside Wall Street’s 2.5% forecast.
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On a monthly basis, price pressures fell 0.1%, slowing from the February advance of 0.2%, as domestic gasoline prices eased 0.74%, according to Energy Department data.
So-called core inflation, which strips out volatile components like food and energy, slowed to an annual rate of 2.8%, besting Wall Street’s 3% forecast and February’s 3.1% pace.
The monthly core reading of 0.1% was also inside Wall Street’s 0.2% forecast and the final February reading of 0.3%.
President Donald Trump paused so-called ‘reciprocal’ tariffs on U.S. trading partners for 90 days yesterday, but left a baseline 10% levy in place and boosted duties on goods from China to a crippling 125%.
“The increase in US tariffs on China’s imports will deliver meaningful upward pressure to costs unless supply chains can be diverted to other economies, so inflation risks remain elevated, even after yesterday’s 90-day reprieve to the rest of the world,” said Seema Shah, chief global strategist at Principal Asset Management.
“The Fed ultimately has no room for complacency, so rate cuts may be fairly constrained,” she added. “We anticipate three to four cuts this year, with a severe labor market slowdown or simmering systemic risks the only factors to drive a more aggressive response.”
Federal Reserve Chairman Jerome Powell has insisted the central bank is in “no hurry” to lower rates as the impac
Olivier Douliery/Bloomberg via Getty Images
U.S. stocks were little changed following the data release, with futures contracts tied to the S&P 500 indicating an opening-bell decline of around 85 points, the Dow Jones Industrial Average called 470 points lower and the Nasdaq priced for a 445-point pullback from last night’s surge.
Benchmark 10-year Treasury note yields were steady at 4.312% following the data release, while 2-year notes were pegged at 3.825%.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 1.2% lower at 101.674.
Earlier this month, the Federal Reserve’s preferred inflation gauge, the PCE Price Index, showed a modest tick higher in February pressures, suggesting that tariff price increases are starting to work their way into the world’s biggest economy.
Related: Did Treasury bond markets cause Trump tariff blink?
Prior to that, Federal Reserve Chairman Jerome Powell had said the central bank’s new growth and inflation forecasts, which lowered GDP estimates while warning of renewed price pressures, underscored the tariff-related uncertainty the economy faces in coming months.
He went on to say that those projections were built on a base case that inflation stoked by U.S. import tariffs would be “transitory.” That’s a word most observers had assumed was indefinitely retired in 2022 when post-pandemic inflation ran much hotter than Fed officials had anticipated.
“The last time there were tariffs … inflation was transitory,” Powell insisted when pressed by reporters. “And it’s still the truth. If there’s an inflationary impulse that’s going to go away on its own, it’s not the right policy to tighten.”
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