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US inflation hits six-month low in March as tariff pressures rise

Inflation slowed sharply in March, new data showed Thursday, highlighting the continued strength and resilience of the US economy just as President Donald Trump prepares to roll out sweeping new tariffs.

In another context, such news might fuel optimism that the rising cost of living is easing.

The Consumer Price Index (CPI) cooled to an annual rate of 2.4% in March, reaching its lowest point in six months.

But the report comes as the United States enacts its most aggressive tariff increases in over a century — a shift that is already sending shockwaves through global trade and could soon make imports and consumer goods significantly more expensive.

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Economists warn that the March CPI report may represent a turning point. Trump’s escalating trade policies are expected to push inflation upward later in the year.

“The decline in core inflation in March will definitely be welcomed by the Fed, particularly as it was evident in both core goods and services components.

“But we know firms had been sucking in huge amounts of imports in January and February in advance of tariff hikes, so the shock to consumer goods prices from tariff hikes is not reflected yet,” said Brian Coulton, chief economist at Fitch Ratings.

The CPI declined 0.1% in March compared to the previous month, a drop from the 0.2% increase seen in February, according to data from the Bureau of Labor Statistics.

It was the first time consumer prices fell month-to-month since May 2020.

Economists had expected a more modest slowdown, predicting a 0.1% monthly dip and an annual rate of 2.6%, according to FactSet.

The overall drop was largely driven by energy prices, which declined partly due to seasonal adjustments. Typically, energy prices rise in March, but concerns about economic growth and recession kept prices subdued.

However, food prices moved in the opposite direction. Grocery bills rose by 0.5% from February, when prices were unchanged.

Egg prices, in particular, surged as the industry continued to recover from a devastating outbreak of avian flu.

The egg index climbed 5.9% from the previous month and was up 60.4% compared to the same time last year.

Although the US Department of Agriculture noted that wholesale egg prices have started falling as the flu outbreak subsides, those price drops have not yet reached retail shelves.

Stripping out the more volatile food and energy sectors, core CPI rose just 0.1% for the month and 2.8% over the past year.

That marks a notable slowdown from February’s 3.1% pace and represents the lowest annual core inflation rate in nearly four years.

(CNN)