By Lucia Mutikani
WASHINGTON (Reuters) – US consumer prices have rebounded moderately as food costs partially offset rising rents, resulting in the lowest annual increase in four years, but inflation outlook remains unknown against the background of tariffs.
The price rise reported by the Labor Bureau on Tuesday fell below economists’ expectations and had little impact on President Donald Trump’s drastic import duties.
Data suggests that price pressures have been cooled before Trump’s chaotic tariff policy, and did not change economists’ views that the Federal Reserve will continue to suspend interest rate reduction cycles until the end of summer.
The US and China took a major step towards eliminating the trade war over the weekend with a 90-day ceasefire, but the comprehensive obligation of 10% of almost all imports remains in place. Sector tariffs continue to be collected.
“We’re committed to providing a great opportunity to help you,” said Jeffrey Roach, chief economist at LPL Financial. “However, uncertainty about what will happen after these temporary trade transactions makes things difficult for the Fed, as male dogs remain at risk. If the fog is not cleared, the Fed may not be able to adjust its policy in June.”
The Labor Bureau’s Labor Statistics Bureau was its first decline since May 2020, after the consumer price index rose 0.1% in March, which rose 0.2% last month. Economists voted by Reuters predicted that CPI would rise by 0.3%. Shelters, including rent, rose 0.3%, accounting for more than half of the CPI increase.
That jump followed a 0.2% increase in March, partially offset by a 0.1% drop in food prices, followed by an acceleration of 0.4% in March. Grocery stores’ prices fell 0.4%, the biggest decrease since September 2020, with egg costs falling 12.7%, the biggest decrease since 1984.
Egg prices, which have risen sharply over the past year and cited as one of the factors contributing to voter dissatisfaction in the last presidential election, have skyrocketed 49.3% from a year ago. Prices for fruits and vegetables fell last month, and prices for cereals and bakery products also fell.
However, the prices of non-alcoholic beverages increased by 0.7%.
Consumers have seen higher costs for natural gas and electricity, but gasoline prices have been eased by 0.1%.
In the 12 months from April to April, CPI rose 2.3%. It was the smallest profit since February 2021, following a 2.4% advance in March. There was little indication that tariffs, including a 25% tax on imports and imported cars and light trucks imposed prior to Trump’s April 2nd announcement of “liberation date,” had increased prices. Country-specific tariffs are delayed until July.
Companies boosted inventory in the first quarter ahead of tariffs.
“We expect the impact of tariffs on prices to begin to materialize by the middle of the year, as the economy has stocks for around 3.7 months of sales,” said Conrad Dequadros, senior economic advisor at Brean Capital.
Tariffs expected to increase prices
The Trump administration has agreed to cut its Chinese product obligations to 30% for the next 90 days. Customs duties on US goods imported into China will decrease from 125% to 10%.
Nevertheless, Yale’s Budget Institute said this year’s tariffs imply a 1.7% rise in consumer prices in the short term, equivalent to a loss of purchasing power of $2,800 per household in the absence of policy response from the US Central Bank. Consumer inflation expectations are also rising sharply.
Financial markets continued to expect the Fed to resume its cut rate in September. The central bank last week maintained its benchmark by varying overnight interest rates in the 4.25%-4.50% range.
Most Wall Street stocks were trading higher. The dollar slid into a basket of currencies. The US Treasury yields were slightly higher.
Excluding volatile foods and energy components, CPI rose 0.2% after winning 0.1% in March. The so-called core CPI inflation is lifted by higher shelter costs, reflecting a 0.4% advance in the owner’s comparable rent. This is more than a 0.1% reduction in hotel and motel rooms costs.
Home furniture prices rose 1.0%, while prescription drugs rose 0.4%. They were covered in cheap apparel, toys, games, hobbies, playground equipment, used cars and trucks. The new car prices remained unchanged. However, data from Cox Automotive’s Kelley Blue Book showed more than doubled in April.
After soaking 0.1% in March, core product prices rose 0.1%. Auto insurance and healthcare costs have increased. However, airline fares extended slides and fell 2.8% amid a decline in tourists and corporate travel.
Core CPI increased 2.8% year-on-year in April, coinciding with the March rise. Based on CPI data, economists estimated that the price index for core personal consumption expenditures (PCE) in April increased by 0.2% after the change in March. This marks the annual increase in core PCE inflation in April to 2.6%. Producer price data for April, scheduled for release on Thursday, could affect these estimates.
The Core PCE Price Index is one of the inflation measures tracked by the Fed with a target of 2%.
“Even the recent agreement between the Trump administration and China cuts the most troublesome import taxes, tariffs on all US trading partners are much higher than they were in early 2025,” said Gus Faucher, chief economist at PNC Financial. “These higher tariffs will tackle the prices of consumer goods over the coming months and boost inflation again.”
(Reporting by Lucia Mutikani, Editing by Paul Simao)
