This morning’s consumer-price index dropped with a sigh of economic relief — and a dash of anxiety.
Prices rose 2.3 percent in April compared to a year ago, according to the Department of Labor. Economists were predicting prices to rise by 2.4 percent.
April’s reading is great news for grocery shoppers: it’s the lowest price hike reading for US consumers since 2021.
The news sent US stock index futures higher on Tuesday, as investors increased expectations that the Federal Reserve was on track to lower borrowing costs this year.
The moves are following a record-setting trading day for Wall Street. Minutes after the inflation report hit the wires, Dow futures were down 0.28 percent, S&P 500 futures rose 0.13 percent, and Nasdaq futures were up 0.33 percent.
Energy prices dipped 3.7 percent.
‘The introduction of sweeping new tariffs on imports into the US roiled markets in April,’ Nicholas Hyett, an investment manager at Wealth Club, said.
‘That’s a relief for investors and borrowers – who have feared that tariffs could cause a spike in prices preventing the Federal Reserve from cutting interest rates to support the economy.’
Shoppers saw prices increase just 2.3 percent in April compared to the same month 2024
But dig a little deeper, and the economic picture gets murkier. Month-over-month, prices ticked up 0.2 percent, both for the overall index and the core reading.
And consumer advocates are worried that prices are about to rise even more. April’s inflation report is the first to capture some economic whiplash from President Donald Trump’s April 2 ‘Liberation Day’ tariff blitz.
The President’s tariff policies could threaten to further increase inflationary pressures that have been weighing on American households since readings peaked above 9 percent in 2022.
Yesterday, the Trump administration announced an agreement to cut its sky-high tariff rate on China for the next 90 days.
Both countries said they’re negotiating to set a comparatively moderate import tax rate. The US had imposed 145 percent taxes on most products shipped from China.
The new import tax regime still carries significant costs for American consumers.
‘The problem is that all the chopping and changing on tariffs means the picture is not at all clear,’ Hyett added.
