US Inflation Unexpectedly Cools Ahead Of Tariffs Impact

Underlying US inflation cooled broadly in March, indicating some relief for consumers prior to widespread tariffs that risk contributing to price pressures.

The consumer price index, excluding often volatile food and energy costs, increased 0.1% from February, the least in nine months, according to Bureau of Labor Statistics data out Thursday. Compared with March of last year, the core CPI rose 2.8%, remaining the tamest in nearly four years.

The overall CPI declined 0.1% from a month earlier, the first decrease in nearly five years, and rose 2.4% on a year-over-year basis.

The CPI was helped by a decline in energy costs, used cars and airfares, as well as slower price growth in apparel.

Treasury yields slid and S&P 500 index futures remained lower and the dollar extended its decline on the day.

While the figures indicate some relief for consumers who have struggled with higher prices for years, the good news risks being short-lived after President Donald Trump put in place more expansive tariffs.

While Trump announced 90-day pause on higher reciprocal tariffs on Wednesday — less than 24 hours after they came into effect — imports from most countries are now subject to 10% duties. The US began collecting tariffs last month on imported steel and aluminum, and levies on China now stand at 125% after retaliation from Beijing earlier this week.

Some of the higher import costs will ultimately be passed on to the consumers, and companies from Target Co. to Volkswagen AG have warned higher prices are in store for Americans.

The uncertainty is keeping Federal Reserve officials in wait-and-see mode as they look for more clarity on the impact the levies will have on inflation — and the economy more broadly.