Consumer price inflation eased more than expected in March as President Donald Trump prepared to launch tariffs against U.S. trading partners, the Bureau of Labor Statistics reported Thursday.
The consumer price index, a broad measure of goods and services costs across the U.S. economy, fell a seasonally adjusted 0.1% in March, putting the 12-month inflation rate at 2.4%, down from 2.8% in February.
Excluding food and energy, so-called core inflation ran at a 2.8% annual rate, having increased 0.1% for the month. That was the lowest rate for core inflation since March 2021.
Wall Street had been looking for headline inflation of 2.6% and core at 3%, according to the Dow Jones consensus.
Slumping energy prices helped keep inflation tame, as a 6.3% drop in gasoline prices helped drive a 2.4% broader decline in the energy index. Food prices climbed 0.4% on the month. Egg prices rose another 5.9% and were up 60.4% from a year ago.
Moreover, shelter prices, among the most stubborn components of inflation, increased just 0.2% in March and were up 4% on a 12-month basis, the smallest gain since November 2021. Used vehicle prices were off 0.7% while new vehicle costs increased just 0.1%, ahead of tariffs that are expected to hit the auto industry hard.
Airline fares declined 5.3% in March and motor vehicle insurance dropped 0.8% and prescription drugs fell 2%.
Stock market futures indicated a sharply lower open on Wall Street following the release, while Treasury yields also were negative.
The report comes a day after Trump’s stunning reversal of parts of his tariff plans as he announced a delay in some of the most aggressive of the duties put in place against dozens of nations. Instead, Trump let stand a 10% blanket levy on all imports announced last week and set a 90-day window during which the White House will negotiate the higher tariffs.
While Trump campaigned on bringing down inflation, progress had been slow to start 2025.
The president nevertheless has called on the Federal Reserve to lower interest rates. Central bank officials have expressed a reluctance to move with so much policy uncertainty in the air, and market pricing indicates the Fed will wait until June before lowering rates again.
The nature of the tariffs has led most economists to expect a significant bump in inflation, though that’s less clear now that Trump has opened the negotiation window.
“Today’s softer than expected CPI release feels backward looking given the large changes to trade policy seen in recent days,” said Kay Haigh, global co-head of fixed income and liquidity solutions at Goldman Sachs Asset Management. “Going forward the Fed is likely to face a difficult trade-off as tariff driven price increases start to feed through to the inflation data and activity remains soft.”
Futures market pricing after the CPI report indicated little change in market expectations for interest rates, with traders pricing in three or four cuts by the end of the year.
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