Inflation coolest in four years in April despite tariff hikes
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The Consumer Price Index rose at the slowest pace since early 2021 in the 12 months through April, the Labor Department said on Tuesday.
Why it matters: Inflation was cooler than expected as President Trump's tariff policies took effect last month.
By the numbers: In the 12 months through April, the Consumer Price Index rose 2.3%, compared to the 2.4% the previous month, the Labor Department said on Tuesday — the smallest gain since February 2021.
- But the measure that excludes food and energy showed less progress: Core CPI increased 2.8% over the last 12 months, unchanged from March. Policymakers see this gauge as a better measure of underlying inflation.
- On a monthly basis, CPI rose 0.2%, after the index had declined slightly the previous month. Core CPI increased by the same amount, up a tick from March.
Details: The data shows little impact on consumer prices from Trump's tariff policy.
- For instance, the index for apparel prices — a category that would bear the brunt of higher tariffs on China — fell 0.2% in April after increasing by 0.4% the previous month.
- There was also little impact from tariffs on automakers. New vehicle prices were flat, while used car and truck prices fell by a half percentage point.
What's next: The Trump administration announced a temporary deal Monday that lowers the tariff on Chinese imports to 30% from the 125% rate that has been in effect since early April.
- That is a relief, though it is still a relatively high rate that is expected to have a negative effect on the economy.
The intrigue: The fast-moving trade policy has the Federal Reserve in a tricky position, with a lack of clarity about whether tariffs will reignite inflation or put a sharp brake on economic growth — outcomes that would require opposite actions from the central bank.
Editor's note: This story has been updated with additional index data.
