US consumer prices unexpectedly fall in March
In the 12 months through March, the CPI advanced 2.4% after rising 2.8% in February
[WASHINGTON] US consumer prices unexpectedly fell in March, but inflation risks are tilted to the upside after President Donald Trump doubled down on tariffs on imported Chinese goods even as he lowered duties on other nations.
The consumer price index dipped 0.1 per cent last month after gaining 0.2 per cent in February, the Labor Department’s Bureau of Labor Statistics said on Thursday (Apr 10).
The decline likely reflected lower energy costs and the fading effects of beginning of the year price hikes.
In the 12 months through March, the CPI advanced 2.4 per cent after rising 2.8 per cent in February. Economists polled by Reuters had forecast the CPI edging up 0.1 per cent and climbing 2.6 per cent year-on-year.
Excluding the volatile food and energy components, the CPI gained 0.1 per cent in March after climbing 0.2 per cent in February. The so-called core CPI inflation increased 2.8 per cent year-on-year in March after rising 3.1 per cent in February.
March’s data likely captured only a fraction of the first wave of Trump’s barrage of import duties, including a 20 per cent tariff on Chinese goods, and levies on steel and aluminium.
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Trump on Wednesday said he had paused targeted tariffs on trade partners for 90 days, less than 24 hours after steep new duties kicked in and plunged financial markets into turmoil.
But Trump jacked up duties on Chinese merchandise to 125 per cent from 104 per cent after Beijing hit back with a 84 per cent tariff on US goods. The European Union paused its first countermeasures against US tariffs, though the bloc was not mentioned in Trump’s statement.
A 10 per cent blanket duty on almost all US imports remains in place. Trump’s tariffs, which he sees as a tool to raise revenue to offset his promised tax cuts and to revive a long-declining US industrial base, have raised the odds of a recession over the next 12 months.
Capital Economics estimated that inflation will peak at about 4 per cent, double the Federal Reserve’s 2 per cent target. Minutes of the US central bank’s March 18-19 meeting published on Wednesday showed policymakers were nearly unanimous that the economy faced risks of simultaneously higher inflation and slower growth.
They noted “participants judged that inflation was likely to be boosted this year by the effects of higher tariffs,” and “their contacts were already reporting increases in costs, possibly in anticipation of rising tariffs.”
Financial markets expect the Fed to resume cutting interest rates in June having paused its easing cycle in January to give officials time to assess the economic impact of the White House’s policies. The Fed’s policy rate is currently in the 4.25 per cent-4.50 per cent range.
Higher goods prices were not expected to spill over to services as a softening labour market puts a lid on wage gains. Goods inflation was, however, seen offsetting the anticipated services disinflation. REUTERS
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