April CPI Weaker Than Expected as Tariff War Begins, but June Rate Cut Still Unlikely

U.S. consumer prices rose less than expected in April, offering a modest sign of easing inflation just as a broad new tariff regime under President Trump’s trade agenda officially takes effect.

The Consumer Price Index (CPI) increased 2.3% year-over-year, slightly below economists’ expectations for a 2.4% gain. On a monthly basis, headline CPI rose 0.2%, also below the forecasted 0.3%. Core CPI—which excludes food and energy—climbed 2.8% from a year earlier, in line with expectations, while the monthly core figure came in at 0.2%, softer than the projected 0.3%.

April’s lower-than-expected CPI may have been aided by an inventory surplus among retailers ahead of the tariff implementation. The U.S. officially began applying a new tariff baseline last month, with Chinese imports now facing punitive duties of up to 145%. While the impact of those tariffs is expected to build over time, early stockpiles may have temporarily softened inflationary pressure.

Shelter costs remained the dominant force in price increases, rising 0.3% in April and accounting for more than half of the monthly CPI gain. The energy index also rose, up 0.7%, driven by higher natural gas and electricity prices, which more than offset a decline in gasoline.

Food prices, by contrast, edged lower, falling 0.1% overall. The decline was led by a 0.4% drop in the food-at-home index, while food-away-from-home prices rose 0.4%.

Other contributors to core inflation included increases in household furnishings, medical care, motor vehicle insurance, education, and personal care. Meanwhile, notable declines were seen in airline fares, used cars and trucks, communication, and apparel.

Despite April's softer CPI, the report did little to shift expectations around Federal Reserve policy. Traders still see only a 9% chance of a rate cut in June, with a 91% probability the Fed will hold rates steady.

While current inflation readings show relative stability, the broader concern now is whether Trump’s sweeping new tariffs will reignite price pressures in the months ahead. If import costs surge in categories such as electronics, apparel, and auto parts, the inflation picture could shift quickly—placing renewed pressure on both the Fed and consumers.