US inflation rises less than expected in April but economists expect stronger impact from tariffs in coming months

US consumer price index increased 0.2% m/m in April after dipping 0.1% last month (the first negative figure in five years) and missed expectations for 0.3% rise.

Annualized inflation increased by 2.3% in April after advancing by 2.4% last month and ticked below 2.4% consensus.

Core inflation, which excludes volatile food and energy components, was up 0.2% last month after rising 0.1% in March, while annualized core CPI was unchanged at 2.8% and in line with expectations.

Moderate increase in consumer prices in April is somewhat encouraging, though economists remain cautious and expect inflation to pick up in coming months, on rise of cost of imported goods from tariffs.

Economists expect to see stronger hit from tariffs in May’s inflation report; however, overall picture became brighter after the latest deal between the US and China, in which both sides slashed initial ultra-high import taxes for the next 90 days, that marked the major step in de-escalation of trade war between two world’s largest economies.

Economists see the prospect for further rise of inflation, although not as sharp as initially predicted, with 90-day ceasefire to give some time to the US policymakers to re-evaluate the situation, although the Fed is likely to stay on hold with monetary policy during this period, after the central bank kept its benchmark overnight interest rate unchanged in the 4.25%-4.50% range in the policy meeting last week.