WASHINGTON — Recent indicators suggest that inflation may have receded in the past month, as costs associated with energy, pre-owned vehicles, and hotel accommodations potentially saw reductions. Nonetheless, the prospect of heightened prices looms, with the lingering tariffs imposed by former President Donald Trump.
According to economists’ estimates collected by FactSet, the Labor Department is anticipated to disclose that consumer prices increased by approximately 2.6% in March compared to the same month the previous year. This represents a modest decline from the 2.8% increase observed in February. Excluding the frequently fluctuating categories of food and energy, prices likely rose by 3%, slightly lower than the 3.1% growth rate in February.
Should these projections prove accurate, they would indicate that inflation is beginning to moderate again after maintaining heightened levels throughout autumn and winter. Core inflation had persisted at 3.3% for five consecutive months before decreasing in February.
Despite this potential easing, inflation remains elevated above the 2% target established by the Federal Reserve’s policymakers. On a monthly scale, core prices are expected to climb by 0.3% in March. Should this rate be maintained, it would exceed the Fed’s inflation target. Nevertheless, overall prices are projected to rise by a modest 0.1% in March, with core figures attracting increased attention as they offer a clearer forecast of inflation trends.
Initially, many economists had anticipated a surge in inflation for the year due to the extensive tariffs on 60 countries announced by Trump. Yet, a temporary 90-day pause on these duties was declared by the former president, although a 10% universal tariff persists, along with 25% duties on steel, aluminum, automobiles, and various goods from Canada and Mexico.
Additionally, tariffs on Chinese imports have surged to a staggering 125% after China retaliated against Trump’s previous tariff impositions. Despite the pause, businesses remain uncertain about future trade policies. Trump also mentioned the potential imposition of tariffs on pharmaceutical imports.
Consumers could experience price increases as a result of these existing tariffs, notably the substantial ones targeting China. The United States annually imports over $60 billion worth of iPhones and other mobile phones from China, along with significant quantities of clothing, footwear, and toys.
Numerous American companies are likely to relocate production outside of China, a strategy that already began under Trump’s earlier term when tariffs were first levied on certain Chinese exports. However, China remains the United States’ third-largest trading partner.
The transition of supply chains away from China will take time and involve costs, potentially leading to increased expenses for U.S. consumers in the near term.
In light of this, Federal Reserve Chair Jerome Powell mentioned last week that the central bank would probably maintain its key interest rate at around 4.3%, pending further information about the impact of Trump’s policies on the economy. Trump, on the other hand, urged the Fed to reduce rates.
“There’s a lot of waiting and seeing going on, including by us,” Powell remarked. “And that just seems like the right thing to do in this period of uncertainty.”