Inflation Stays Soft Amid U.S.-China Trade Tensions

U.S. consumer prices fell in March due to cheaper gasoline and used vehicles. However, the decline may be temporary amid intensified tariffs on Chinese goods. This has fueled recession fears and lowered interest rate expectations. Airline and hotel prices dropped, reflecting reduced discretionary spending.

The month of March saw a surprising drop in U.S. consumer prices, driven by lower costs in gasoline and used motor vehicles. Despite this, the benign inflation reading is unlikely to hold as President Donald Trump reinforces tariffs on Chinese imports.

Reported by the Labor Department, this first monthly decline in nearly five years signals potential softening demand amid growing recession fears, which may compel the Federal Reserve to cut interest rates substantially this year. Data suggests a pullback in discretionary spending is highlighted by reduced airline and hotel rates.

Economists warn that the expected inflation boost from tariffs might be countered by declining demand. With contributions from food sectors partially offset by decreases in fruits and cereal prices, the overall Consumer Price Index rose 2.4% year-on-year in March. The Federal Reserve, poised for possible policy adjustments, highlights concerns over inflation and growth risks.

(With inputs from agencies.)