Inflation decreases in March, tariff turmoil yet to have an effect: CEI analysis

The Consumer Price Index for March shows a 0.1 percent decrease across all sectors, deviating from previous months. CEI senior economist Ryan Young says that while this is good news, the full effect of tariffs is yet to be felt by consumers.

“This CPI report is not the big test for tariffs affecting prices. That will come next month, when April’s data are released on May 13. Today’s report covers March, and President Trump’s Liberation Day tariffs were not announced until April 2.

“As for today’s release, it is mostly good news, and I’ll take it. Its 0.1 decrease is a pleasant surprise, though it is mostly because of supply and demand in energy markets. Underlying monetary inflation stayed stable, and most tariff-related price increases did not phase in during March.

“Thanks to the tariff pause, next month’s CPI release also won’t have as sharp an increase as originally feared. The tariffs that are still happening on China, Canada, Mexico, autos, plus the new 10 percent universal tariff, will likely have some effect on CPI.

“The Federal Reserve may once again decide to hold interest rates steady at its next meeting on May 6-7 due to policy uncertainty. President Trump is pushing the Fed to lower rates to stimulate the economy, though this would raise inflation. With tariffs raising prices, the Fed does not want to do this. A rate increase might counteract some of tariffs’ inflation-like effects, but would risk slowing down an economy that, while still healthy, is racked by tariff uncertainty and recession fears.”