Inflation Cools, but Tariff Impacts Loom

The US inflation rate decreased for three consecutive months in April when annual consumer prices rose 2.3% compared to 2.4% in the previous month according to the Labor Department. The price index showed a 0.2% increase during April following a 0.1% decrease in March. The price of groceries decreased by 0.4% during the month while eggs became 12.7% cheaper although their annual price remained 49% higher than last year. The delayed price increases were caused by pre-tariff stockpiles despite Trump implementing 30% tariffs on China and 10% tariffs on all other countries on April 5. The prices of clothing decreased by 0.2% while new car prices remained constant but computer and toy prices increased which suggested tariff effects. Economists including Laura Rosner-Warburton forecast that inflation will increase to 3% by June because tariff expenses will start to appear in the market while Mattel and other companies prepare to raise their prices. The inflation rate in April increased because of rising rents but decreased because of lower airfare and hotel prices resulting from fewer foreign visitors. The core inflation rate stayed at 2.8%. The Federal Reserve maintains its 2% inflation target but trade wars create delays that might prevent them from raising interest rates. The US-China truce brought market gains yet businesses and the Federal Reserve continue to monitor supply chain developments because inflation could surpass 3% during summer months which would create difficulties for consumers.