Inflation barely occurred in April as the tariff president, which was implemented by President Donald Trump at the beginning of the month, had not yet appeared in consumer prices, the Commerce Department reported Friday.
The Federal Reserve’s main inflation measure, the Personal Consumption Expense Price Index, rose just 0.1% that month, bringing annual inflation to 2.1%, a low of 205. Monthly reading was in line with Dow Jones Consensus predictions, but annual levels were 0.1 percentage points lower.
Excluding food and energy, the core reading, which tends to gain a greater focus from Fed policymakers, showed 0.1% and 2.5% measurements for estimates of 0.1% and 2.6%, respectively. Central bank officials believe the core is a better indicator of long-term trends.
However, consumer spending slowed sharply that month, increasing by 0.2% along the consensus, but slower than the 0.7% rate in March. The more cautious consumer mood was also reflected in the personal savings rate, which jumped from 0.6% points in March to 4.9%, which rose to the highest level in nearly a year.
Personal income skyrocketed 0.8%, a slight increase from the previous month, but well above the 0.3% forecast.
Food prices fell 0.3% a month, while energy goods and services rose 0.5%. One of the most stubborn inflation components, shelter costs increased by 0.4%.
The market has shown little response to the news, with stock futures continuing to be low, with mixed yields from the Ministry of Finance.
Trump is pushing the Fed to lower key interest rates as inflation continues to be pulled back to the central bank’s 2% target. However, policymakers are reluctant to move as they await the long-term impact of the president’s trade policy.
Oliver Allen, a senior economist in Pantheon macroeconomics, wrote:
On Thursday, Trump and Federal Reserve Chairman Jerome Powell held their first in-person meeting since the president began his second term. However, the Fed’s statement showed that the future path for monetary policy has not been discussed and emphasized that decisions will be free from political considerations.
Trump slapped over 10% of all US imports, part of an effort to uniformize the trading environment, which the US recorded a record $140.5 billion deficit in March. In addition to general tariffs, Trump has launched a selective mutual tariff that is much higher than the general charge of 10%.
Since then, Trump has supported more serious tariffs in favor of a 90-day negotiation period with affected countries. Earlier this week, an international court broke tariffs and said Trump had surpassed his authority and failed to prove that national security was threatened by trade issues.
Then, in the latest in the drama, the Court of Appeals granted the White House efforts for a temporary stay in the order from the US Court of International Trade.
Economists are concerned that tariffs could cause another round of inflation, but historical records show that their impact is often minimal.
At a policy meeting earlier this month, Fed officials expressed concern about potential tariff inflation, particularly during a period of growing concern about the labour market. Rising prices and slowing economic growth could lead to stagflation, a phenomenon the US has never seen since the early 1980s.
People will be shopping at a Brooklyn grocery store in New York City on May 13th, 2025. SpencerPlatt|Getty Images