The Bureau of Labor Statistics has released the US inflation numbers for March 2025. The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.1 percent on a seasonally adjusted basis in March, after rising 0.2 percent in February. The all items index rose 2.4 percent for the 12 months ending March, after rising 2.8 percent over the 12 months ending February. The US core inflation rate has hit a 4-year low.

The index for all items less food and energy or the core inflation, rose 0.1 percent in March, following a 0.2-percent increase in February. The all items less food and energy index rose 2.8 percent over the last 12 months, the smallest 12-month increase since March 2021.

In the meantime, tensions are rising between the US President and the US Federal Reserve. Powell has repeatedly said that unless data shows otherwise, there would be no rate cut. Trump, however, made a strong case for Powell to lower interest rates. Conversely, Powell voiced concerns about rising inflation after Trump tariffs were fully implemented in a recent public speech.

With the release of April 2025 data on May 13, 2025, the Bureau of Labor Statistics (BLS) will replace the survey data collected for the CPI’s leased cars and trucks index with transaction data purchased from a vendor to increase the accuracy of the index.

The annual inflation rate in the US eased for a second consecutive month to 2.4% in March 2025, its lowest level since September, down from 2.8% in February, and below forecasts of 2.6%. driven in part by a decline in energy prices.

The US core inflation rate has hit a 4-year low.

The energy index decreased 3.3% and the food index increased 3%. Compared to the previous month, the CPI decreased 0.1%, the first decline since May 2020, after a 0.2% rise in February and compared to expectations of 0.1%.

The index for energy fell 2.4%, as a 6.3% decline in the index for gasoline more than offset increases in the indexes for electricity and natural gas. The food index, in contrast, rose 0.4% as the food at home index increased 0.5% and the food away from home index rose 0.4%.

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In the meantime, tensions are rising between the US President and the US Federal Reserve. Powell has repeatedly said that unless data shows otherwise, there would be no rate cut. Trump, however, made a strong case for Powell to lower interest rates. Conversely, Powell voiced concerns about rising inflation after Trump tariffs were fully implemented in a recent public speech.

The minutes of the March FOMC Meeting also revealed that Fed officials were worried about inflation and tariffs.

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The US-China trade war has begun. Hours after China hiked tariffs on US goods to 84%, President Trump swiftly boosted tariffs on Chinese imports to 125%. In a major shift from his earlier position of retaining historically high tariffs, President Trump has suspended all reciprocal tariffs for three months, except China. On Wednesday, the universal 10% tariff rate will be applied to all nations that were previously subject to reciprocal tariff rates.

As a result, US stock futures edged higher on Thursday after the major averages posted a historic rally as President Donald Trump announced a 90-day pause on many of his new tariffs.

Another implication of the tariff pause is that the Fed may cut interest rates. A delay in tariff implementation will not result in the higher inflation that Powell expects. A rate cut in May, therefore, may become a reality.

Markets will also be watching closely for any early signs of inflationary impact from tariffs already in place since February, including a 10% levy on Chinese imports and increased duties on global steel and aluminum.

There is no FOMC meeting in April, so a lot of market action will revolve around tariffs and earnings results. Any expectation of a rate cut in the FOMC meeting on May 6-7 has some probability now. A rate cut in the June 17-18 FOMC meeting looks more likely. The summary of economic projections will also be released in the June FOMC meeting.

Meanwhile, markets are seeing highly volatile intraday sessions, driven mostly by news and events related to the tariff war.