In March, a sharp slowdown in the inflationary process was recorded in the United States economic system.
The mentioned dynamic, as noted by the media, indicates that the US economy remained strong and stable ahead of the start of practical implementation of the trade policy measures of United States President Donald Trump, which became a kind of shock factor for the markets and significantly increased fears about the likelihood of a recession, making this potential scenario a more realistic prospect.
In many other situations, inflation data similar to those recorded last month would be a well-reasoned reason for sustained optimism. But the current state of affairs both in the space of the US economy and on a global scale is different, against which the March information is losing its power in a certain sense. In a more favorable period, a slowdown in inflation would be a reason for joy, since the cost of living for Americans is not rising, but now the likely consequences of Washington’s tariff policy cancel the celebration of recorded achievements.
As noted by the media, published on Thursday, April 10, the data on the dynamic of prices in the context of the present conditions and circumstances can be described as an example of what could have been in the space of the United States economic system if not for the trade war.
In March, the Consumer Price Index in the US was fixed at the 2.4% mark. In February, the corresponding figure was 2.8%. This information was published by the United States Bureau of Labor Statistics.
What the inflation data for April will be is still unknown for objective reasons, but the prospects in this case are not the most favorable. In the United States, businesses, markets, and consumers are in a pessimistic mood as US tariffs rise to the highest level in more than a century. The consequences of the current configuration of Washington’s trade policy are still unknown, but at the same time, there is what can be described as massive confidence in negative results.
Robert Frick, corporate economist at Navy Federal Credit Union, said during a conversation with media representatives that the United States may be whistling past the graveyard right now because it is known that costs are going to increase. This statement was made as part of a commentary on inflation data.
In March, prices in the United States fell 0.1% month-on-month. It is worth noting that for the first time since May 2020, prices have fallen on a monthly basis.
According to FactSet, the consensus forecast of economists predicted that the reduction in energy prices would drive down the overall consumer price index rate to 0.1% for the month and 2.6% for the year.
In a sense, the information published on Thursday is outdated. In this case, it implies the perception of data as a kind of indicator reflecting the state of affairs in the space of the US economic system. In the relevant context, it is worth mentioning that the bulk of Donald Trump’s tariffs on imported goods came into force in the current month. It is for this reason that the March data can be described as outdated since they do not reflect the new configuration of economic reality, the main component of which is the incipient trade war.
The Donald Trump administration reacted very positively to the drop in oil and gas prices, seeing this as a positive result of the implementation of the president’s US policies called Drill Baby Drill. At the same time, as noted by Wells Fargo economists, the mentioned prices showed a decrease amid a supply-demand imbalance. The specified experts also note that in this case, concerns about the prospects for economic growth, which put pressure on crude oil prices, became an impact factor.
The rising cost of goods and services, which is widely expected against the backdrop of Washington’s tariff policy, can trigger a chain reaction that will be a very sensitive process for both the consumer community and the economy as a whole. Rising prices eat away at households’ disposable incomes. Against this background, people are starting to pull back on spending within the framework of standard consumer behavior practices. Also, the current state of affairs may provoke a decrease in business spending. Then the real growth of gross domestic product (GDP) becomes negative. It is worth clarifying that the relevant process will depend on the degree of escalation of the trade war. The downturn in the economy inevitably provokes an increase in unemployment.
It is also worth mentioning that the inflation data was released the day after Donald Trump announced a pause in some of the most aggressive tariffs put in place against dozens of nations.
It is unknown how the Federal Reserve System will perceive the inflation data. It is worth mentioning that Donald Trump called on the central bank of the United States to cut interest rates. The financial regulator adheres to the position that it is not necessary to make any decisions in the conditions of the current uncertainty. According to media reports, the markets are currently dominated by the expectation that the Fed will not make any changes to monetary policy in the context of borrowing costs until June.
