WASHINGTON (Reuters) – U.S. consumer prices rebounded moderately in April, but inflation is likely to pick up in the coming months as tariffs boost the cost of imported goods.
The consumer price index CPI increased 0.2% last month after dipping 0.1% in March, which was the first decline since May 2020, the Labor Department’s Bureau of Labor Statistics said on Tuesday. Economists polled by Reuters had forecast the CPI would rise 0.3%. In the 12 months through April, the CPI climbed 2.3% after advancing by 2.4% in the 12 months through March.
Excluding the volatile food and energy components, the CPI rose 0.2% last month after gaining 0.1% in March. The so-called core CPI inflation increased 2.8% on a year-on-year basis in April after rising 2.8% in March.
The data likely only captures tariffs, including a doubling of fentanyl-related taxes on all Chinese imports to 20% and a 25% levy on imported cars and light trucks, imposed before President Donald Trump’s April 2 “Liberation Day” announcement.
While Trump in April paused for 90 days most of his country-specific tariffs, a 10% blanket duty on almost all imports remained in place. Economists said they expected the hit from the tariffs on prices to start showing up significantly beginning with May’s CPI report.
The U.S. and China took a major step towards de-escalating their trade war over the weekend, with Washington agreeing to slash duties on Chinese goods to 30% for the next 90 days. Tariffs on U.S. goods imported into China would decline to 10% from 125%.
Economists still expect inflation to rise this year because of tariffs, but probably not as sharply as they had anticipated before the 90-day truce between the world’s two largest economies, allowing the Federal Reserve to maintain its wait-and-see stance. They also see the easing of trade tensions to help the U.S. economy to avert a recession, though growth was likely to be sluggish this year.
“Inflation will likely rise to a lesser degree, peaking at around 3.4% year-over-year in the fourth quarter this year instead of our prior forecast of 4%,” said Kathy Bostjancic, chief economist at Nationwide. “Economic growth still slows since tariff rates will be higher than before President Trump took office.”
The Fed has a 2% inflation target. U.S. duties are looming on pharmaceutical products and semiconductors. Trump sees tariffs as a tool to raise revenue to offset his promised tax cuts and to revive a long-declining U.S. industrial base.
The Fed last week kept its benchmark overnight interest rate unchanged in the 4.25%-4.50% range. Financial markets expect the central bank to resume its policy easing in September.
(This story has been refiled to add a dropped word in paragraph 1)
(Reporting by Lucia Mutikani; Editing by Paul Simao)
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