What's happened
The US consumer price index fell to 2.3% in April, down from 2.4% in March. Despite this drop, economists warn of potential inflation spikes due to tariffs imposed by the Trump administration. Consumer sentiment has also declined, indicating growing economic anxiety among Americans.
What's behind the headline?
Key Insights
- Tariff Impact: Economists believe that the full effects of tariffs will not be seen until later this year, with predictions of rising inflation as companies pass on costs to consumers.
- Consumer Sentiment: A significant drop in consumer sentiment suggests that Americans are bracing for higher prices, with expectations of inflation reaching levels not seen since 1981.
- Market Reactions: Stock markets have reacted positively to temporary tariff pauses, but the underlying economic anxiety remains, as many consumers feel the pinch of rising costs.
- Future Projections: Analysts from Goldman Sachs and Bank of America anticipate that core inflation could rise significantly by the end of the year, particularly in sectors like consumer electronics and automobiles.
Overall, while the current CPI data shows a decrease, the looming threat of tariffs and their delayed effects on prices could lead to a more challenging economic landscape in the coming months.
What the papers say
According to Business Insider UK, the consumer price index (CPI) fell to 2.3% in April, but experts warn that the impact of tariffs will soon be felt. Ellen Zentner from Morgan Stanley noted, "This number doesn't matter, because the tariff effects are really going to start to show up in next month's number." Meanwhile, The Guardian reported a drop in consumer sentiment, with six out of ten Americans indicating financial anxiety due to the economy. Ryan Sweet from Oxford Economics stated, "There isn’t a lot of evidence of tariffs boosting the CPI in April, but this shouldn’t be surprising as it takes time." This sentiment is echoed by Federal Reserve Chair Jerome Powell, who acknowledged that tariffs could delay inflation from reaching the Fed's target rate of 2%.
How we got here
April's inflation report follows the announcement of new tariffs by President Trump, which are expected to impact prices in the coming months. While the CPI has cooled, many analysts predict that the effects of tariffs will soon be reflected in higher consumer prices.
Go deeper
- What are the expected impacts of the tariffs?
- How does consumer sentiment affect the economy?
- What are analysts predicting for inflation in the coming months?
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