US consumer prices rise moderately in April
In the 12 months through April, the CPI climbs 2.3%
[WASHINGTON] US consumer prices rebounded moderately in April, but inflation is likely to pick up in the months as tariffs boost the cost of imported goods.
The consumer price index (CPI) increased 0.2 per cent last month after dipping 0.1 per cent in March, which was the first decline since May 2020, the Labor Department’s Bureau of Labor Statistics said on Tuesday (May 13). Economists polled by Reuters had forecast the CPI would rise 0.3 per cent. In the 12 months through April, the CPI climbed 2.3 per cent after advancing by 2.4 per cent in the 12 months through March.
Excluding the volatile food and energy components, the CPI rose 0.2 per cent last month after gaining 0.1 per cent in March. The so-called core CPI inflation increased 2.8 per cent on a year-on-year basis in April after rising 2.8 per cent in March.
The data likely only captures tariffs, including a doubling of fentanyl-related taxes on all Chinese imports to 20 per cent and a 25 per cent levy on imported cars and light trucks, imposed before US President Donald Trump’s Apr 2 “Liberation Day” announcement.
While Trump in April paused for 90 days most of his country-specific tariffs, a 10 per cent blanket duty on almost all imports remained in place. Economists said they expected the hit from the tariffs on prices to start showing up significantly beginning with May’s CPI report.
The US and China took a major step towards de-escalating their trade war over the weekend, with Washington agreeing to slash duties on Chinese goods to 30 per cent for the next 90 days. Tariffs on US goods imported into China would decline to 10 per cent from 125 per cent.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Economists still expect inflation to rise this year because of tariffs, but probably not as sharply as they had anticipated before the 90-day truce between the world’s two largest economies, allowing the Federal Reserve to maintain its wait-and-see stance. They also see the easing of trade tensions to help the US economy to avert a recession, though growth was likely to be sluggish this year.
“Inflation will likely rise to a lesser degree, peaking at around 3.4 per cent year over year in the fourth quarter this year instead of our prior forecast of 4 per cent,” said Kathy Bostjancic, chief economist at Nationwide. “Economic growth still slows since tariff rates will be higher than before President Trump took office.”
The Fed has a 2 per cent inflation target. US duties are looming on pharmaceutical products and semiconductors. Trump sees tariffs as a tool to raise revenue to offset his promised tax cuts and to revive a long-declining US industrial base.
SEE ALSO
The Fed last week kept its benchmark overnight interest rate unchanged in the 4.25 to 4.5 per cent range. Financial markets expect the central bank to resume its policy easing in September. REUTERS
Share with us your feedback on BT's products and services
