President Donald Trump’s on-again-off-again implementation of tariffs on most goods coming into the U.S. doesn’t seem to be having an effect on the inflation rate – yet.
With the cost of gas, airlane fare and hotel rooms dropping, consumer prices rose 2.4% in March from a year earlier, according to data released by the Labor Department. That’s down from 2.8% in February and represents the lowest inflation figure since September, according to a report from The Associated Press.
Excluding the volatile food and energy categories, core prices rose 2.8% compared with a year ago. That’s down from 3.1% in February and marks the smallest increase in core prices in nearly four years.
According to the AP, economists are warning that the data is mostly backward-looking and likely to be overtaken by the impact of the tariffs that Trump has left in place. Those include huge duties on China (Trump hit China with tariffs up to 145%), even after the 90-day pause of some tariffs announced Wednesday. Inflation should start end of this year.
“We got a huge tariff increase,” Paul Donovan, chief economist for UBS Wealth Management, told AP. “There was an extreme tariff increase for less than 24 hours, and we’re back to a huge tariff increase, relative to where we were a month ago. This is increasing taxes on U.S. consumers. And they’re going to have to find the money to pay these taxes.”
On a monthly basis, prices actually fell 0.1% in March, the first monthly drop in nearly five years. Core prices rose just 0.1% in March from February.
“That was nice, but don’t get used to it,” Greg McBride, chief financial analyst at Bankrate. “All this is looking in the rear-view mirror. With both inflation and the overall economy, uncertainty abounds about what might be lurking around the bend.”
Last week, Federal Reserve Chair Jerome Powell said that the central bank was likely to keep its key interest rate unchanged at about 4.3% as it waited to see how Trump’s policies impacted the economy. Trump called for the Fed to cut rates on Friday.
“There’s a lot of waiting and seeing going on, including by us,” Powell said. “And that just seems like the right thing to do in this period of uncertainty.”
