Lower Food Prices Tame US Consumer Inflation in April, Tariffs Squeeze Awaited

• U.S. consumer prices rebounded moderately in April as declining food costs partially offset rising rents, leading to the smallest annual increase in four years, but the inflation outlook remains unclear against the backdrop of tariffs.
• The rise in prices reported by the Labour Department's Bureau of Labour Statistics on Tuesday, May 13, 2025, was below economists' expectations and showed little impact from President Donald Trump's sweeping import duties, whose impact economists expected to become evident by the middle of this year.
• The Consumer Price Index (CPI) increased 0.2% last month after dipping 0.1% in March, which was the first decline since May 2020, the Labour Department said. Economists polled by Reuters had forecast that the CPI would rise 0.3%.
• Shelter, which includes rents, rose 0.3% and accounted for more than half of the increase in the CPI. That said, that jump following a 0.2% gain in March was partially offset by a 0.1% decline in food prices, which followed a 0.4% acceleration in March. Furthermore, grocery store prices decreased 0.4%, the largest decline since September 2020, pulled down by a 12.7% drop in the cost of eggs, the biggest drop since 1984.
• The data suggested price pressures were cooling before Trump's tariffs policy, but did not change economists' views that the Federal Reserve would continue to pause its interest rate-cutting cycle until late in the summer.
• Though the U.S. and China took a major step towards de-escalating their trade war over the weekend with a 90-day truce, a 10% blanket duty on almost all imports remains in place. Sectoral tariffs also continue to be levied. "Improvements in global trade will provide some clarity on the future path of inflation," said Jeffrey Roach, chief economist at LPL Financial.

 (Source: Reuters)