From Yahoo Finance: 2025-05-13 08:42:00

U.S. consumer prices rose moderately in April with a 0.2% increase, the smallest annual rise in four years, as rents increased but food costs declined. The inflation outlook remains uncertain amidst tariffs, with prices cooling before the impact of President Trump’s import duties. Economists expect the Federal Reserve to hold interest rates steady until late summer.

Despite a 90-day truce in the U.S.-China trade war, a 10% blanket duty on most imports remains, with sectoral tariffs ongoing. Tariff uncertainties make it challenging for the Fed to adjust policy in June, with stagflation a risk. The recent trade agreements may offer clarity on inflation’s future path.

The Consumer Price Index (CPI) rose 2.3% in the 12 months through April, the smallest gain since February 2021. The rise was driven by a 0.3% increase in shelter costs but offset by a 0.1% decline in food prices. Gasoline prices fell 0.1%, while egg prices surged 49.3% from a year ago.

Businesses expanded inventories in Q1 ahead of tariffs, potentially explaining tame price movements. The Trump administration agreed to reduce Chinese duties to 30% for 90 days, but the Budget Lab at Yale predicts a 1.7% increase in consumer prices this year without central bank intervention. Consumers’ inflation expectations are rising.

Financial markets anticipate the Fed will resume rate cuts in September, with the current range at 4.25%-4.50%. Wall Street stocks traded higher, the dollar weakened, and U.S. Treasury yields increased slightly. Excluding food and energy, core CPI rose 0.2% in April, driven by higher shelter costs and owners’ equivalent rent.

Core goods prices increased slightly, with jumps in household furniture and prescription medication but declines in airfares. The core CPI rose 2.8% year-on-year in April, matching March’s increase. Economists estimate core PCE inflation will rise to 2.6% based on April’s data. Producer price data expected Thursday could impact these estimates.

Despite recent agreements to reduce import taxes, tariffs remain high against U.S. trading partners, which may lead to increased consumer goods prices over the next few months. The core PCE price index is a key inflation measure for the Fed, which aims for a 2% target.



Read more at Yahoo Finance: Lower food prices tame US consumer inflation in April, tariffs squeeze awaited