Even if you squint, there is little sign of the trade war to be found in this morning's April inflation data.

• Rather, it's the latest evidence that price pressures were still diminishing before the full onset of new tariffs.

Why it matters: The brunt of higher import taxes looks likely to arrive this summer, even with de-escalation in the last several days, and even as the underlying trajectory for inflation looks the best it has in four years.

Catch up quick: The CPI rose 2.3% in the 12 months ended in April, the lowest annual pace since February 2021.

• Over the last three months, core CPI — excluding volatile food and energy — rose at a 2.1% annual rate.
• Because CPI runs a little higher than the inflation measure preferred by the Federal Reserve, that's evidence that trend inflation, in advance of the trade war's impact, was squarely in line with the Fed's 2% target.

Yes, but: Neither the new report's details nor anecdotal reporting from businesses points to the tariff impact flowing through to consumer prices — yet.

• The "Liberation Day" tariffs were announced April 2 then paused for 90 days starting April 9.
• Retailers and their suppliers are still working through pre-tariff inventories. It takes weeks or months for goods to make it across the Pacific Ocean, through ports and wholesale distributors, to end up on store shelves.
• Even some product categories for which Americans overwhelmingly rely on imported goods showed scant signs of the new duties in the April data. Apparel prices were actually down 0.2%.

State of play: The de-escalation of the trade war with China announced early yesterday, which pulled the tax on Chinese imports from 145% to 30%, lowers the odds of an extreme inflation surge and/or empty store shelves over the summer.

• However, the cumulative impact of tariffs is still likely to be visible over the months ahead.

By the numbers: The Yale Budget Lab's latest analysis, incorporating the China deal and last week's U.S.-U.K. deal, finds that American consumers are now on track to face an effective tariff rate of 17.8%, the highest since 1934.

• That's enough to push the price level up by 1.7 percentage points, or about $2,800 per household. It works out to a 0.7 percentage point reduction in GDP growth and a 0.4 percentage point increase in the unemployment rate.

Between the lines: That all points to a one-time jump in prices in the near term, and a slowdown but not a recession.

• In that scenario, the Fed would be inclined to cut interest rates, so long as it did not see evidence that longer-term inflation expectations were coming unmoored.

What they're saying: "[I]t is good news that underlying inflation continued to decelerate ahead of the tariffs," wrote Eric Winograd, head of developed markets at AllianceBernstein.

• "That should allow the Fed to cut rates later this year if the growth outlook slows as I anticipate even if tariffs push prices higher for a time."

Student loan delinquency rates surged to a five-year high in the early months of 2025, the New York Fed said this morning, as pandemic-era relief expired, allowing delinquencies to appear on credit bureaus' reports.

• It implies that millions of Americans who have already been behind on student loan payments will now get dinged for it when looking to borrow money to buy a car or home.

By the numbers: Roughly 8% of aggregate student debt was at least 90 days delinquent in the first quarter of 2025, compared to less than 1% in the previous quarter.

• About 14% of borrowers — or 6 million Americans — had a loan 90 days or more past due or in default, about the same share as in the same period in 2020.
• Delinquency rates look slightly worse than pre-pandemic times when those who are not actually required to make payments are excluded.
• Among those who are required to make payments, roughly 24% were behind on student loans in the first quarter, compared to 22% in the first quarter of 2020.

The big picture: The jump in student loan delinquencies masks an otherwise upbeat snapshot of household debt. Delinquency rates for credit card debt and auto loans have "leveled off" over the past year, the New York Fed said.

• Credit card debt declined, as is typical when consumers pay off debt racked up during the holiday season. But aggregate auto loans balances also fell, the first quarterly decline since the third quarter of 2020.

What to watch: The economic consequences for individual delinquent Americans could be severe, with higher borrowing costs that could shut them out of loan access. However, the impact on the overall economy would likely be more limited.

• "Millions of borrowers face steep declines in their credit standing which will increase borrowing costs or seriously limit their access to credit like mortgages and auto loans," researchers at the New York Fed wrote in a blog post.
• "There's a world in which this could be kind of the bulk of delinquencies," a New York Fed researcher told reporters today. "Some of these could cure once they see that their credit report has been dinged from it."

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