Trump's tariffs disrupt the situation, and the U.S. March CPI may become the "final chapter" of inflation slowdown
Due to President Trump's large-scale tariff increases, the recent trend of slowing price increases may be disrupted. The March Consumer Price Index (CPI) report may be the last time investors see a moderation in inflation. The March CPI is expected to drop to 2.5%, while the core CPI is projected to rise by 3.0%. Although the pace of price increases has slowed, costs for services such as housing and healthcare remain high, keeping the core inflation rate elevated
According to the Zhitong Finance APP, due to President Trump's large-scale tariff increases, the recent trend of easing price increases may be disrupted, and the March Consumer Price Index (CPI) report may be the last time investors see signs of easing inflation.
The March CPI will be released at 8:30 AM Eastern Time on Thursday. Less than 24 hours before the release, the U.S. suspended the imposition of 90-day reciprocal tariffs on most countries, causing the U.S. stock market to surge significantly due to the latest trade dynamics.
Although Trump has currently suspended reciprocal tariffs, the 10% baseline tariff that took effect over the weekend for most countries still remains. Mexico and Canada still face another set of tariffs related to fentanyl, while specific industry tariffs on steel, aluminum, and automobiles remain unchanged.
Wells Fargo economist Sarah House stated in a report preview: "The March CPI data may seem somewhat lagging. However, it should give us insight into how the changing trade environment is beginning to affect prices."
Price increases are expected to ease in the third month of this year. However, after the February report showed that overall CPI and core CPI price increases slowed for the first time since July, the monthly core prices for March are still expected to remain strong.
The overall annual inflation rate for March is expected to drop to 2.5%, continuing to slow from February's 2.8% annual increase. Month-on-month, prices are expected to rise by 0.1%, down from February's 0.2% increase.
The "core" CPI for March (excluding volatile food and energy costs) is expected to show a year-on-year increase of 3.0%. This is slightly lower than February's 3.1% increase, with February's figure being the lowest annual increase in core CPI since April 2021.
Monthly core prices are expected to rise by 0.3%, higher than February's 0.2% increase.
Due to high costs of housing and services such as insurance and healthcare, the core inflation rate in the U.S. has remained stubbornly high. However, February housing prices further showed signs of easing, with an annual increase of 4.2%, the smallest 12-month increase since December 2021.
Nevertheless, considering the changing trade situation, House from Wells Fargo stated that due to tariffs accelerating price increases, March appears to be the low point for core inflation this year. Coupled with growing concerns about a self-inflicted economic recession in the U.S., this keeps the Federal Reserve in a "wait-and-see" mode regarding interest rates.
The economist pointed out: "While there are many uncertainties regarding the duration of these tariffs, transmission effects, and second-round price impacts, the trend is clear." She also mentioned that the current trade policy "poses new challenges for controlling inflation."
She added: "For more than a year, the Federal Reserve's final phase of fighting inflation has been fraught with difficulties, highlighting the challenge of completely eliminating inflation without significantly weakening demand."
On this point, Federal Reserve Chairman Jerome Powell made it clear in a speech last week that the Fed is not in a hurry to adjust its interest rate stance: "It is still too early to determine the appropriate path for monetary policy."