icon
icon
icon
icon
$300 Off
$300 Off

News /

Articles /

All Eyes on April CPI: Tariffs to Test Inflation Outlook

AInvest Morning BriefTuesday, May 13, 2025 2:40 am ET
3min read

U.S. April CPI data is about to be released. Trump’s “reciprocal tariffs” officially took effect on April 2, and this inflation report will provide a direct measure of the tariffs’ impact on U.S. inflation. The eyes of the global market are on this data release.

The general market consensus is that the year-over-year increase in April CPI will be around 2.4%, roughly in line with the previous reading. However, the month-over-month growth rate is expected to jump significantly from -0.1% to 0.3%. The core CPI, excluding food and energy prices, is expected to remain flat year-over-year but accelerate on a monthly basis.

Ask Aime: "Will April's CPI reveal Trump's tariffs' inflation impact?"

Due to the impact of tariffs, it is almost certain that the month-over-month CPI will accelerate. However, as long as the increase does not significantly exceed expectations, the market is likely to absorb it. Specifically:

If the CPI rises roughly in line with expectations, markets are likely to breathe a sigh of relief. Combined with better-than-expected progress in trade negotiations, the “shoe has dropped” smoothly, and risk assets could see further support.

If CPI growth falls significantly short of expectations, it would trigger a “celebration moment” in markets. Inflation cooling more than expected, coupled with major breakthroughs in U.S.-China trade talks, would suggest inflationary pressures are rapidly easing. The Federal Reserve would then have a high probability of cutting rates in June, and U.S. equities could challenge new highs.

If CPI rises much more than expected, that would be the worst-case scenario. It would signal that inflation remains stubborn, forcing the Fed to maintain restrictive interest rates for longer, which would weigh heavily on risk assets.

🔍 What Major Investment Banks Are Saying

Goldman Sachs: Categories like apparel, entertainment, and communications may face moderate price pressures; used car prices are expected to decline, helping contain inflation.

Goldman expects core CPI to rise by 0.3% month-over-month in April, up from 0.1% in March. The firm highlights that tariff-sensitive categories (such as apparel, entertainment, and communications) will face moderate upward pressure, but a 0.5% decline in used car prices will help offset inflationary effects.

Wells Fargo: Preventive inventory buildup may help restrain a sharp rise in goods inflation.

The bank's baseline forecast: headline CPI year-over-year at +2.3%, month-over-month at +0.2%; core CPI year-over-year at +2.8%, month-over-month at +0.25%.

Wells Fargo believes that U.S. firms engaging in preventive inventory stocking, along with absorbing some cost increases to maintain consumer demand, may curb inflation expectations from accelerating—at least through May. However, beneath the surface, cooling core service inflation will contrast with gradually strengthening core goods inflation.

ABN AMRO: Reciprocal tariff policy paused after just one week, limiting its immediate impact.

ABN AMRO notes that the reciprocal tariff policy only lasted one week before being paused, thus producing limited initial effects. It expects no significant CPI upside surprise. Retail sales are likely to contract after surging last month, while industrial production should see a modest rebound.

Crédit Agricole: Fed will only cut rates twice in 2024, prioritizing inflation control.

The bank forecasts headline CPI year-over-year at +2.5%, month-over-month flat; core CPI year-over-year at +3.0%, month-over-month at +0.3%.

Crédit Agricole expects tariffs to drive core goods CPI higher, pushing overall core inflation close to 4% by the end of 2025. While markets were once more optimistic than the bank’s forecast, recent implied inflation expectations have converged toward its path. The bank maintains its view that the Fed will cut rates only twice more this year. Even if the April CPI report is in line with expectations, this view remains unchanged.

The Fed faces conflicting pressures from its dual mandate—controlling inflation and supporting employment. Crédit Agricole expects the Fed to prioritize inflation control, whereas markets seem more focused on labor market support, revealing a potential expectations gap.

ANZ: Inflation momentum remains mildly upward.

ANZ points out that the softness in March core CPI stemmed from volatile components such as housing, airfare, and used cars. Its internal diffusion index for core CPI edged higher, suggesting mild upward inflation momentum persists.

According to the Tax Foundation, the average U.S. tariff on imported goods now stands at 25.5%, while Yale’s Budget Lab estimates it at 22.5%—the highest levels since the late 19th century. Both figures indicate that import taxes have risen by at least 20%. Even with substitution effects and margin compression, this will have a significant impact on inflation.

TradingKey: Three of four CPI components are weakening; April CPI likely to undershoot.

TradingKey notes that among the four major CPI subcomponents:

The CRB Food Index’s year-over-year rise may drive food inflation higher. U.S. retail gasoline prices have continued falling, suggesting energy inflation will decline. The Manheim Used Vehicle Value Index has slightly dipped, indicating limited room for transportation inflation. Both the S&P CoreLogic Home Price Index and Zillow Rent Index are weakening, pointing to slower housing-related inflation.

With only food showing upward momentum—and accounting for just 13.7% of CPI weight—while the other three components trend downward, April CPI is likely to fall short of expectations. This would enhance the likelihood of a June Fed rate cut and boost risk asset performance post-release.

Comments

Add a public comment...
Post
User avatar and name identifying the post author
0alix
05/13

Investing in crypto stands to be the best decision I've ever made in my Life. With the help of a trustworthy broker.


I earn huge profits weekly despite the fluctuation of the market..

0
Reply
User avatar and name identifying the post author
0alix
05/13
@0alix

you can reach out to +.1563.279-8487👍

0
Reply
User avatar and name identifying the post author
Nyghl
05/13
@0alix How long you been into crypto? Any top picks or predictions?
0
Reply
User avatar and name identifying the post author
Das_oul
05/13
@0alix I got in late 2021, took profits, and got out. FOMO hits hard when seeing gains like yours.
0
Reply
View all 4 replies
User avatar and name identifying the post author
DaddyPass
05/13
$WFC Looking Ready for a Big Move https://talkmarkets.com/content/stocks--equities/is-wfc-setting-up-for-a-major-rally?post=497186
0
Reply
User avatar and name identifying the post author
Sad_Predicament
05/13
@DaddyPass What makes you think WFC is ready?
0
Reply
User avatar and name identifying the post author
Sgsfsf
05/13
Tariffs might spike CPI, but not a big deal if it aligns with expectations. 🤔
0
Reply
User avatar and name identifying the post author
CarefulShilong
05/13
@Sgsfsf What’s your take on core CPI?
0
Reply
User avatar and name identifying the post author
-Joseeey-
05/13
My strategy: Hold $AAPL, diversify, and pray for rate cuts. 📈
0
Reply
User avatar and name identifying the post author
LufaMaster
05/13
If CPI misses, rate cut buzz grows. Fed might pivot, but markets should watch labor data too.
0
Reply
User avatar and name identifying the post author
Snorkx
05/13
$TSLA might get a boost if inflation cools faster than expected.
0
Reply
User avatar and name identifying the post author
Imgoatedp2
05/13
"The CPI data is like the final episode of 'The Inflation Game of Thrones'—anticipation is high, but will the tariffs be the dragon that burns it all? While the immediate impact seems contained, like a well-played chess move, the long-term effects might reveal the true power of these tariffs. Remember, every move has its consequences, and sometimes, the game isn't over when you think it is.
0
Reply
User avatar and name identifying the post author
_punter_
05/13
@Imgoatedp2 "CPI data drop: the moment of truth. Will tariffs be the 'dragon' or just a 'eme'? Either way, buckle up and HODL—after all, the market's like, 'to the moon!' 🚀💸"
0
Reply
User avatar and name identifying the post author
Ditty-Bop
05/13
Fed's gotta balance act: inflation vs. employment. Tough choice!
0
Reply
User avatar and name identifying the post author
abdul10000
05/13
Reciprocal tariffs had a one-week cameo, what a plot twist!
0
Reply
User avatar and name identifying the post author
printial
05/13
@abdul10000 Tariffs as a soap opera: drama, but do they really move the market? 🤔
0
Reply
User avatar and name identifying the post author
aiolyfe
05/13
If CPI misses, rate cut buzz grows. Fed's tough spot—balance inflation & jobs. Markets seem to favor employment boost over rate cuts.
0
Reply
User avatar and name identifying the post author
AbuSaho
05/13
Core CPI might surprise, but markets could shrug it off.
0
Reply
User avatar and name identifying the post author
Any-Cartoonist-7052
05/13
@AbuSaho What makes you think core CPI might surprise?
0
Reply
Disclaimer: The news articles available on this platform are generated in whole or in part by artificial intelligence and may not have been reviewed or fact checked by human editors. While we make reasonable efforts to ensure the quality and accuracy of the content, we make no representations or warranties, express or implied, as to the truthfulness, reliability, completeness, or timeliness of any information provided. It is your sole responsibility to independently verify any facts, statements, or claims prior to acting upon them. Ainvest Fintech Inc expressly disclaims all liability for any loss, damage, or harm arising from the use of or reliance on AI-generated content, including but not limited to direct, indirect, incidental, or consequential damages.
You Can Understand News Better with AI.
Whats the News impact on stock market?
Its impact is
fork
logo
AInvest
Aime Coplilot
Invest Smarter With AI Power.
Open App