Inflation rose slightly in April compared to March, but at a slower annual pace

Inflation ticked up in April after a slowdown the month before, but the annual pace of inflation eased unexpectedly, in a first test of Trump’s tariff policies.

The Labor Department said Tuesday that its consumer price index, a key gauge of inflation, rose 0.2 percent last month, reversing a slight decline in March. But the annualized pace cooled to 2.3 percent, a small decrease.

Core inflation, which excludes food and energy, rose 2.8 percent from a year earlier—the same as the previous month. If monthly gains continue to firm, annual rates could start to edge toward 4 percent by the end of the year, economists say.

The S&P 500 rose 0.8% in morning trading, coming off a big gain Monday to start the week after the United States and China announced a 90-day pause in their trade war to allow for negotiations. The Dow Jones Industrial Average was down 76 points, or 0.2%, as of 10:15 a.m., and the Nasdaq composite was 1.3% higher.

Trump’s tariffs, many imposed in mid-April, marked a sharp escalation in his protectionist policies since he returned to the White House. While the full impact will take time to materialize, some importers rushed to bring in goods ahead of the deadline, and early price increases are showing up in private-sector data.

China remains a major wild card in the inflation outlook. The administration initially imposed sweeping 145 percent tariffs on a wide range of Chinese goods, sparking concern among retailers and manufacturers about soaring input costs. But in a surprise move, China and the United States announced Monday that they had agreed to lower tariffs on goods from each other’s countries for 90 days, offering a temporary reprieve in the trade war.

More than half of the monthly increase in April was fueled by a 0.3 percent increase in shelter costs, the labor department said. Energy prices rose 0.7 percent, fueled by an increase in natural gas and electricity prices. Household furnishings increased 1.0 percent in April.

Meanwhile, food prices fell 0.1 percent as egg prices—which have risen sharply on an annualized basis—fell 12.7 percent from March. Prices for new autos were unchanged while used cars and truck prices fell 0.5 percent.

Trump, meanwhile, has dismissed inflation concerns outright. “Gasoline, Energy, Groceries, and all other costs, DOWN. NO INFLATION!!!” he posted on social media Monday, contradicting warnings from economists that his new tariffs could soon push prices higher.

Some analysts say businesses are still working through stockpiled inventory and are hesitant to raise prices too quickly, which could delay a more noticeable rise in consumer prices until at least May. Still, early signs of pressure are accumulating. While inflation in core services like health care and housing may be easing, core goods inflation is starting to pick up, wrote Sarah House, a senior economist at Wells Fargo.

“With tariffs no longer merely a threat but a reality, we view it as only a matter of time before higher import costs filter through to consumer prices,” she said, adding that the bank expects core inflation to jump to a 3.6 percent annualized increase by the fourth quarter.

The Federal Reserve last week held interest rates steady for a third straight meeting, warning that economy faces the dual risks of stubborn inflation and rising unemployment.

Tariffs complicate that outlook. While designed to protect U.S. industries, they often raise prices for consumers—leaving Fed officials to determine whether inflation is being driven by one-time price increases they can look past or by more persistent pressures that may require tighter monetary policy.

“Tariffs are highly likely to generate at least a temporary rise in inflation,” Fed Chair Jerome H. Powell said in a speech last month. “The inflationary effects could also be more persistent.”