Background on Inflation and its Key Drivers
Inflation in the United States moderated to 2.3% in April, primarily due to a decline in gas prices, according to official data released on Tuesday. This figure is slightly above analysts’ expectations, despite being the lowest annual increase since February 2021.
The Consumer Price Index (CPI)
The Consumer Price Index (CPI) for April was slightly below the 2.4% annual rate recorded in March, as reported by the Department of Labor in a statement.
Impact of Trump’s Tariffs on Inflation
These data cover the period when tariffs imposed by the Trump administration on imports, including hefty duties on China (recently eased), took effect. These tariffs rattled financial markets and raised concerns about a potential surge in prices.
The 2.3% inflation rate is the smallest annual increase since February 2021, with analysts expecting no change from March’s 12-month measurement according to MarketWatch consensus.
Excluding volatile energy and food prices, the underlying inflation rate was 2.8% annually, aligning with market expectations.
Gas Price Decline and Economic Activity
Since April, gas prices have dropped by 11.8%, largely due to traders’ fears about Trump’s protectionist offensive and its impact on economic activity.
Despite the positive data, Ben Ayers from Nationwide noted that 2.3% “might be the smallest figure of 2025.” He further predicted that inflation could surpass 3% in the summer due to trade tariffs overwhelming consumer prices.
Currently, retailers are selling through stocks accumulated before tariff implementation, delaying price adjustments on shelves.
Experts’ Perspectives on Future Inflation
Ryan Sweet from Oxford Economics summarized that the current forces, such as falling energy prices, are masking inflation caused by higher customs duties. He anticipates this situation will change in the coming months, as the average tariff rate is among the highest since the 1930s and will be inflationary.
Key Questions and Answers
- What is the current inflation rate in the US? The inflation rate moderated to 2.3% in April.
- What factors contributed to this moderation? The primary factor was a decline in gas prices due to traders’ concerns about Trump’s protectionist policies.
- How do analysts view this inflation rate? Although slightly above expectations, it’s the smallest annual increase since February 2021.
- What do experts predict for future inflation? Experts, like Ryan Sweet from Oxford Economics, anticipate that inflation will rise as higher customs duties take effect.
