The Consumer Price Index in April rose 2.3% on an annual basis, rising less than economists had expected yet still reflecting price hikes that remain above the Federal Reserve’s goal of bringing down inflation to a 2% rate.
By the numbers
The CPI was forecast to rise 2.4% last month, according to economists polled by financial data firm FactSet. The CPI, a basket of goods and services typically bought by consumers, tracks the change in those prices over time.
April’s reading reflects the lowest level since February 2021, according to EY chief economist Gregory Daco in an email.
On a month-over-month basis, the CPI rose 0.2%, lighter than the 0.3% pace forecast by economists.
Housing costs were a major driver of inflation last month, the Bureau of Labor Statistics said. And energy costs also ticked higher, despite lower gasoline prices, due to increases in natural gas and electricity costs.
Grocery prices dropped slightly last month, declining 0.1% from March. The average price for a dozen Grade A eggs dropped 12.7% to $5.12 in April, marking the first month-to-month decline in egg prices since October 2024.
Still, egg prices remain near historic highs as a persistent outbreak of bird flu continues to wipe out flocks of egg-laying hens. The April figure is 79% higher than the same month a year earlier, when the price averaged $2.86 per dozen.
What experts say
Economists are looking for early signs that Mr. Trump’s tariffs are trickling through to American households. Because tariffs are import taxes paid by U.S. companies, which largely pass on the added costs to shoppers, they are at some point expected to boost consumer prices.
Earlier this month, Federal Reserve Chair Jerome Powell said the central bank is taking a wait-and-see approach on Mr. Trump’s tariffs, which he said could boost inflation and blunt economic growth. But so far, the tariff impact hasn’t shown up in economic data, which typically is backward-looking because it reflects activity from the previous month.
Mr. Trump has also announced tariffs, such as his April 2 “Liberation Day” levies, and then backed off from them. On April 9, he hit the pause button with a 90-day delay, scaling back the tariffs to a 10% rate.
And on Monday, the Trump administration and China agreed to a temporary but significant easing of tariffs imposed over the last couple months, scaling back the import duties on Chinese-made goods from 145% to 30%.
Meanwhile, some consumers and businesses rushed to order goods ahead of the tariffs’ imposition, aiming to skirt the new import duties by front-loading their purchases. Because of this, the impact of the tariffs might not show up in economic data for another few months, economists say.
“[I]n reality, the data for April is likely to be largely unaffected by President Trump’s announcements on Liberation Day,” said Julien Lafargue, chief market strategist at Barclays Private Bank, in an email. “This is because exemptions were granted for goods that had left exporting countries before 2 April, and because consumers and businesses rushed to front-run tariffs in February and March.”
He added, “As such, both the Fed and global investors will still need to be a bit more patient before they can properly assess the impact of the trade uncertainty on consumer prices.”
What does the CPI report mean for your money
Because of the tentative trade agreement between China and the U.S., inflation may not rise as much as earlier anticipated, noted EY’s Daco, who said he’s lowered his year-end CPI forecast by 0.4 percentage points to 3.2%.
With inflation still expected to pick up later this year, albeit at a lower pace than earlier forecast, the Fed may decide to cut rates twice in 2025, rather than the three cuts Daco had earlier expected. He added that he believes the first rate cut will occur in September, rather than July.
April’s cooler-than-expected data may also give the Fed more breathing room to hold off on cutting rates as it assesses the impact of Mr. Trump’s trade policies, said Carl Weinberg, chief economist with High Frequency Economics, said in a report.
“The Fed can stand still on rate hikes and cuts based on this data while it patiently waits to see the impact of erratic policy changes on prices in the months ahead, at least for now,” Weinberg said.
The result for consumers and businesses could be a longer wait for relief on borrowing costs, as the Federal Reserve’s benchmark rate helps determine what banks, credit card companies and other lenders charge borrowers.
contributed to this report.
