U.S. Inflation Slows in March as Gas Prices Drop

10 Apr at 9:40 am

3132 posts

U.S. Inflation Slows in March as Gas Prices Drop/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ Inflation slowed to 2.4% in March, its lowest level since September, as gas prices dropped sharply. The moderation comes ahead of potential price pressures from President Trump’s sweeping tariff policies. Economists remain cautious, warning that existing and future duties may still drive inflation higher later this year.

FILE – A shopper checks eggs before he purchases at a grocery store in Glenview, Ill., Tuesday, Jan. 10, 2023. (AP Photo/Nam Y. Huh, File)

March Inflation Slows: Quick Looks

Consumer prices rose 2.4% in March, down from 2.8% in February.
Core inflation (excluding food and energy) dipped to 2.8% from 3.1%.
Gas price declines drove the broader easing in inflation last month.
This marks the second straight drop in core inflation, signaling a potential cooling trend.
Trump’s 90-day pause on sweeping tariffs temporarily eases trade-related price concerns.
A 125% tariff on Chinese imports remains, alongside 25% tariffs on steel, autos, and goods from Mexico.
Economists expect existing tariffs will still push inflation higher later this year.
Uncertainty around future trade policy is impacting business and consumer sentiment.
The Federal Reserve is holding interest rates steady, monitoring economic effects.
Chair Jerome Powell suggests caution amid global economic uncertainty.

U.S. Inflation Slows in March as Gas Prices Drop

Deep Look

U.S. inflation cooled more than expected in March, providing a welcome reprieve for consumers even as the threat of escalating trade tariffs continues to cast a long shadow over the economy. According to a Thursday report from the Department of Labor, consumer prices rose 2.4% from a year earlier, down from a 2.8% annual increase in February. The drop marks the lowest inflation rate since September and suggests that some price pressures are finally easing.

A significant driver of the decline was the sharp drop in gasoline prices, which helped push overall inflation lower. When volatile food and energy prices are stripped out, core inflation fell to 2.8%, compared to 3.1% the month prior. This is the second consecutive monthly decline in core inflation and an encouraging sign after it had held steady at 3.3% for five months.

Economists closely watch core inflation because it is considered a more stable measure of underlying price trends. The latest figures suggest that inflation may be moving closer to the Federal Reserve’s 2% target, although risks remain on the horizon.

Among those risks: President Donald Trump’s aggressive trade policy. Last week, Trump shocked markets by announcing sweeping new tariffs on imports from nearly 60 countries. Though he announced a 90-day pause on most of those tariffs on Wednesday, a 10% universal tariff remains in place, as do 125% duties on all imports from China, along with 25% tariffs on steel, aluminum, cars, and various goods from Canada, Mexico, and China.

While the pause in tariff implementation has temporarily eased recession fears, the uncertainty over future trade measures continues to weigh on business planning and consumer confidence. Many economists caution that even the existing tariffs—particularly those on Chinese electronics, clothing, toys, and mobile phones—could push prices higher later in the year.

Despite the cooling inflation data, the Federal Reserve remains cautious. In a speech last week, Fed Chair Jerome Powell signaled that interest rates will likely remain unchanged at 4.3%, as the central bank monitors how Trump’s trade decisions play out across the broader economy.

“There’s a lot of waiting and seeing going on, including by us,” Powell said. “And that just seems like the right thing to do in this period of uncertainty.”

Trump, for his part, has called for rate cuts, arguing that inflation data supports lower borrowing costs. But the Fed has indicated it won’t make any hasty moves until the economic outlook becomes clearer.

Meanwhile, some inflation pressure may come from structural changes to global supply chains. As U.S. companies look to reduce reliance on Chinese manufacturing in response to tariffs, many are shifting production to alternative markets. However, that transition is costly and time-consuming, and may itself drive up prices for consumers in the near term.

China, still America’s third-largest trading partner, has retaliated with its own tariffs, escalating tensions. While many firms began diversifying supply chains during Trump’s first term, the process has intensified in recent months, adding another layer of complexity to inflation forecasts.

Looking ahead, economists remain cautiously optimistic. While headline inflation appears to be slowing, the durability of that trend will depend heavily on the outcome of current trade negotiations and whether tariffs are fully reinstated after the 90-day pause expires.

The Labor Department also reported that on a monthly basis, overall prices increased just 0.1% in March, and core prices rose 0.3%, which, if sustained, would still exceed the Fed’s target over time. The monthly increase highlights how fragile the disinflation trend may be.

With Trump’s trade moves dominating the economic narrative, the coming weeks will be crucial in determining whether inflation continues to ease—or returns with force as tariffs take hold.