April’s inflation report delivered a modest sigh of relief to consumers and policymakers alike, as prices rose slightly less than expected, even as President Donald Trump’s broad tariff regime began to take effect. But with tariffs casting a long shadow over the summer economic outlook, the reprieve may be short-lived.
According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) rose 0.2% in April, putting annual inflation at 2.3%, its lowest level since February 2021. This narrowly beat expectations, which had forecast a 2.4% year-over-year rise.
Lutnick: “Don’t talk about the Biden inflation. That’s another whole gig. When we left, when President Trump in 2019 had the lowest inflation in history.”
(Trump left office in Jan. 2021. It’s an easy thing to remember on account of him trying that self-coup on Jan. 6, 2021.)
— Matt Novak (@paleofuture.bsky.social) May 11, 2025 at 11:47 PM
The core CPI, which strips out volatile food and energy prices, also rose 0.2% for the month, with the 12-month figure holding at 2.8%, right in line with predictions.
April’s relatively tame CPI readings came just before Trump’s new 10% universal tariffs and reciprocal duties began to bite, and economists caution that the full impact of those policies won’t show up until May or June’s data.
“Good news on inflation, and we need it given inflation shocks from tariffs are on their way,” said Robert Frick, corporate economist at Navy Federal Credit Union.
Trump’s tariffs—an across-the-board 10% on all imports, with a particularly steep 145% reciprocal rate aimed at China—were partially paused through a 90-day truce with Beijing. Still, the general tariff structure remains in place and, once importers pass those costs onto consumers, upward pressure on inflation is likely to return.
Nomura economist Aichi Amemiya cautioned that while no significant impact from tariffs was seen in April, that could change quickly:
“We expect higher tariffs will likely exert upward pressures on core CPI starting in May.”
Even in April’s cooled landscape, shelter prices continued to dominate the inflation picture. Rent and housing costs, which make up roughly one-third of the CPI index, rose 0.3%, contributing more than half of the overall price increase for the month.
Other highlights:
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Energy prices rose 0.7%, reversing March’s 2.4% drop.
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Food prices declined 0.1%.
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Used vehicles fell 0.5%, while new vehicle prices were flat.
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Medical care services rose 0.5%, and health insurance ticked up 0.4%.
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Motor vehicle insurance continued its climb, rising 0.6%.
One standout: egg prices plummeted 12.7%, thanks to modest supply recovery, though prices are still up 49.3% year-over-year due to persistent avian flu disruptions.
We need the markets to crash, inflation going up thru the roof, unemployment going skyhigh so that the MAGA faithful suffer and turn on their dear leader
— g-rod5🇺🇲🇮🇹🇨🇦🇲🇫 (@g-rod555.bsky.social) May 13, 2025 at 10:27 AM
Real average hourly earnings were flat for the month but are up 1.4% from a year ago. That’s not robust wage growth, but it’s better than the inflation-eroded paychecks Americans faced in recent years.
Still, the data may not provide enough fuel for early interest rate cuts. After Trump’s tariff pause with China, market expectations shifted: traders now expect just two rate cuts, starting in September, down from earlier forecasts of three, beginning in June.
Who actually trusts the ‘official’ US govt employment or inflation numbers now?
— august september (@agostosettembre.bsky.social) May 13, 2025 at 10:26 AM
This is crucial because while the Federal Reserve prefers the PCE index over CPI, the CPI still informs market sentiment and central bank outlooks. The Producer Price Index (PPI)—a more forward-looking inflation measure—will be released Thursday and could shift the Fed calculus again.
