The March consumer inflation report, which showed some prices at their lowest level in more than four years, was overlooked among recent tariff headlines.
Core inflation, which excludes the volatile food and energy factors, rose at a 2.8% annual rate, the best number since March 2021.1
A few months ago, Wall Street would have cheered the news. But with all eyes on tariffs, few were even talking about the report.
One thing is certain: the March news makes the Fed’s upcoming decisions on short-term interest rates more interesting. On one hand, inflation is trending lower, and job growth is strong, so the Fed might consider adjusting rates to help economic growth. On the other hand, trade talks are a wild card, as some investors fear tariff-driven price increases could start to feed into the economy soon.
However, as today’s table shows, market participants expect the Fed to look past tariffs and adjust rates four times in 2025. Concerns about a recession — a decline in economic activity that lasts more than a few months — may push the Fed to adjust as early as June. (The Fed funds rate is currently in the target range of 4.25% – 4.5%).
The economy always sends mixed messages, but recently, trade issues have compounded the situation. If you’re having difficulty wrapping your head around what’s happening, please don’t hesitate to reach out. Our team is here and ready to help.
1CNBC.com, April 10, 2025