Consumer price inflation saw a greater-than-anticipated decline in March, coinciding with President Donald Trump’s plans to impose new tariffs on international trading partners, according to a report released by the Bureau of Labor Statistics on Thursday.
The consumer price index, which serves as a comprehensive gauge of the costs of goods and services in the U.S. economy, registered a seasonally adjusted decrease of 0.1% in March. This change brought the annual inflation rate down to 2.4%, a drop from 2.8% in February.
When excluding volatile food and energy prices, the core inflation rate stood at 2.8% on an annual basis, reflecting a monthly increase of 0.1%. This marks the lowest core inflation rate recorded since March 2021.
Market analysts had anticipated a headline inflation figure of 2.6% and a core inflation rate of 3%, based on projections from the Dow Jones consensus.
Falling energy prices were a key factor in keeping inflation levels subdued, with a notable 6.3% drop in gasoline prices contributing to a broader 2.4% decrease in the energy index. Despite this, food prices rose by 0.4% during the same period, including a 5.9% increase in egg prices which are now 60.4% higher than last year.
Furthermore, shelter costs—often a stubborn driver of inflation—experienced a modest increase of just 0.2% in March, resulting in a 12-month rise of 4%, the smallest since November 2021. Prices for used vehicles fell by 0.7%, while new vehicle prices edged up by 0.1%, ahead of anticipated tariffs that could significantly impact the auto sector.
March also saw a 5.3% decline in airline fares, along with a 0.8% drop in motor vehicle insurance and a 2% decrease in prescription drug prices.
The aftermath of the report led to expectations of a substantially lower opening for Wall Street, with Treasury yields also trending downward.
This release follows Trump’s unexpected decision to amend aspects of his tariff strategy, as he postponed implementing some of the most aggressive tariffs directed at several nations. The only remaining action is a 10% blanket tariff on all imports, accompanied by a 90-day negotiation period regarding the proposed increased tariffs.
Despite campaigning on the promise of addressing inflation, progress has been sluggish as 2025 approaches.
Trump has urged the Federal Reserve to consider lowering interest rates; however, central bank officials have shown hesitance to act amidst ongoing uncertainties in policy, leading analysts to predict that any interest rate cuts may not occur until June.
Given the nature of the tariffs, many economists are bracing for a noticeable rise in inflation; however, the prospect of negotiations may complicate these expectations.
Kay Haigh, who serves as the global co-head of fixed income and liquidity solutions at Goldman Sachs Asset Management, noted that “today’s softer than expected CPI release feels backward looking given the large changes to trade policy seen in recent days.” He added that the Federal Reserve would likely encounter a complex balancing act as tariff impacts begin to reflect in inflation data while economic activity remains subdued.
Subsequent to the CPI findings, futures market predictions showed little alteration in expectations for interest rates, with traders anticipating three to four cuts by year-end.
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