13 May 2025
If you are covering the latest US inflation statistics, please find below a comment from Lindsay James, investment strategist at Quilter:
“As the US and China strike a temporary deal on tariffs, Donald Trump will be pleased to see inflation has managed to ease slightly in the US following his tariff blitz at the beginning of April. Headline inflation moderated to 2.3% year on year, with core CPI holding steady at 2.8%. However, on a monthly basis, both headline and core inflation grew by 0.2% in April, up from a decline of 0.1% in March.
“The US is far from out of the woods when it comes to inflation. The first quarter of the year saw businesses ramp up their inventories as they looked to stockpile ahead of ‘Liberation Day’. As such, price rises are very much delayed, and we can still expect inflation in the US to spike because of these policies. This is, of course, why the Federal Reserve is reluctant to cut interest rates at this point.
“The reprieve for Chinese goods will likely lead to some more re-stocking before the end of the 90-day period. But while tariffs are much reduced since yesterday, they remain markedly higher than before the 2nd April. The ‘Art of the Deal’ means no-one knows how permanent these tariffs may become, if at all, or if they will be reintroduced in a less harsh form. However, businesses will become increasingly wary of the shifting sands beneath their feet as these deadlines approach. Given we are already almost at the halfway point of Trump’s 90 day pause for the ‘reciprocal tariffs’ on other nations, we may soon see them building in more margin through price rises to protect themselves from sudden changes in policy making.
“Tariffs are not the only thing weighing on inflation either, however, and there remain some other underlying factors that aren’t changing as quickly. Food prices in the US remain elevated despite Trump’s campaigning to lower those pressures for consumers.
“Today’s inflation figure may paint somewhat of a sanguine picture, but scratch lightly under the surface and it is clear the US faces a number of risks. With economic growth slowing at the same time, the Fed is left in a bind of where to go from here. Risk of policy misstep, therefore, is growing and as such market volatility remains very much on the table.”
