Consumer price growth cooled in March as the White House prepared far-reaching global tariffs, with a key inflation measure falling to its lowest level since March 2021.
The consumer price index slowed to an annual rate of 2.4%, less than expected and below the 2.8% notched the month before, the Bureau of Labor Statistics reported Thursday. Inflation rose just 0.1% between February and March, in line with forecasts and below the 0.2% monthly reading seen in February.
A 12-month measure of price growth that excludes volatile food and energy prices climbed 2.8%, the smallest annual increase for that so-called core reading since March 2021. The pace of price hikes for airfare, car insurance, used vehicles and recreation all eased in March.
Despite the favorable reading, concerns remain widespread that President Donald Trump’s unprecedented and ever-changing tariff agenda — which he abruptly softened Wednesday — will bring rising prices in the coming months.
“Today’s softer than expected CPI release feels backward looking given the large changes to trade policy seen in recent days,” Goldman Sachs analysts said Thursday morning. The bank warned that “tariff driven price increases [will] start to feed through to the inflation data” before long.
Even before Trump’s sweeping tariff rollout on April 2, many investors were predicting some run-up in consumer costs.
U.S. businesses “appear eager to pass on cost increases to consumers,” analysts with BNP Paribas wrote in a note to clients this week. They cited a February Federal Reserve survey that found 80% of respondents would raise prices following higher input costs, with 60% stating the increase would at least equal the amount of the cost hike.
“These findings indicate both widespread impact and a strong likelihood that a majority of affected firms will pass cost increases through to consumers,” the analysts wrote.
While the pause announced Wednesday means the economic fallout from Trump’s plan may not be as severe as feared, Wall Street firms continue to predict a dramatic slowdown in the economy as a result of the entire episode.
In a note to clients following Trump’s tariff pause Wednesday afternoon, Goldman Sachs said it still predicted a 45% chance of a recession, with economic growth in 2025 slowing to 0.5% and 12-month inflation rising to as much as 3.5%.
Trump has put his own spin on the situation, writing on his Truth Social platform this week that there was “no inflation” as oil prices and food prices were falling.
That is an outlier view — one not even shared by Trump’s own treasury secretary, who recently acknowledged on NBC News’ “Meet the Press” that there would be a “one-time price adjustment” from the tariffs, though he did not foresee “endemic inflation” persisting.
In remarks last week, Federal Reserve Chairman Jerome Powell warned inflation from the tariffs could prove more durable than what the administration may hope.
“We face a highly uncertain outlook with elevated risks of both higher unemployment and higher inflation,” the central bank leader said at a Washington, D.C.-area event. “While tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent.”
Any reprieve in the pace of price growth would allow the Fed some breathing room to better manage the financial conditions Trump has imposed, Barclays Private Bank said in a note. Absent that, it will continue to be caught between stabilizing the economy and accommodating Trump’s policies.
“Continued inflationary pressures are reducing the central bank’s ability to respond proactively to a deterioration in the growth outlook,” wrote Julien Lafargue, chief market strategist at Barclays Private Bank.
