Inflation cooled faster than economists’ expectations in the month of March, though the impacts of tariffs could still mitigate those gains.
The Consumer Price Index (CPI), an estimate of the price of all household consumer goods and services, rose by 2.4% year-over-year in March, beating economists’ expectations of a 2.6% increase, though still higher than the Federal Reserve’s goal of 2%. Core CPI, a measure of CPI excluding more volatile food and fuel prices, rose 2.8% year-over-year, less than the predicted 3%.
While inflation is cooling, Federal Reserve officials and experts have signaled that interest rate cuts might not happen in the near term. Fed Chairman Jerome Powell said Friday that President Donald Trump’s fast-moving trade policies should be given some time before the Fed looks at interest rate adjustments either way.
Mohamed El-Erian, president of Queens’ College, Cambridge, and chief economic adviser at Allianz SE, made a similar comment Thursday morning on X, noting the positive inflation signs might not immediately impact interest rates.
“US CPI inflation for March was better (lower) than the consensus forecasts — across the board. The monthly price changes came in at -0.1% for headline and 0.1% for core. This took the annual measures down to 2.4% and 2.8%, respectively — low levels not seen for several years,” El-Erian said.
“The forward-looking information content of these numbers is heavily influenced by how you think all the news on tariffs will impact price/wage-setting behavior, as well as household/corporate impact on aggregate demand,” he added.
US CPI inflation for March was better (lower) than the consensus forecasts — across the board.
The monthly price changes came in at -0.1% for headline and 0.1% for core. This took the annual measures down to 2.4% and 2.8%, respectively — low levels not seen for several years.… https://t.co/xDeYFZ8y0W— Mohamed A. El-Erian (@elerianm) April 10, 2025
Minneapolis Fed President Neel Kashkari wrote in an essay Wednesday morning – before the inflation report or Trump’s 90-day pause on most tariffs on most countries was announced – that interest rates should stay the same until tariffs have more time to take effect.
“In my view, the hurdle to change the federal funds rate one way or the other has increased due to the tariffs. Given the paramount importance of keeping long-run inflation expectations anchored and the likely boost to near-term inflation from tariffs, the bar for cutting rates even in the face of a weakening economy and potentially increased unemployment is higher,” Kashkari wrote. “Given that we don’t yet know how many countries will respond to the tariffs and whether we are beginning a trade war with tit-for-tat tariff increases, the risk of unanchoring inflation expectations seems to have increased notably.”
