March US CPI dipped while one-year ahead inflation expectations rose

In a week marked by market volatility, two contrasting inflation readings offered different perspectives on the path of inflation. The March Consumer Price Index (CPI) showed softer-than-expected inflation, with a headline decrease of 0.1% month-over-month and a minimal core CPI increase of 0.06%, excluding food and energy. This implies that previous inflation spikes may have been temporary and influenced by seasonal factors. However, this softer CPI reading was still overshadowed by the April 2 announcement of country-specific reciprocal tariffs, which briefly pushed the S&P 500 into bear market territory and significantly lowered consumer sentiment to its second-lowest level. With one-year-ahead inflation expectations soaring to 6.7%, the highest since 1981, markets and consumers were concerned about the potential impact of tariffs on prices and U.S. growth.

Amidst this turmoil, a bright spot appeared with the announcement of a 90-day pause on reciprocal tariffs. This pause, announced after the University of Michigan's consumer sentiment survey along with the removal of tariffs on certain electronics and potential exceptions for auto parts facing a 25% tariff, signals a willingness to negotiate and may offer markets some stability.

The key takeaway for investors navigating this complex economic landscape is to maintain focus on long-term goals and stay invested. As trade policy uncertainty continues, vigilance is essential in responding to these policy shifts and their potential impacts on U.S. economic growth and inflationary trends. Remaining committed to a long-term strategy will help investors weather the fluctuations and uncertainties of the current market environment.

All market and economic data as of 04/14/25 are sourced from Bloomberg Finance L.P. and FactSet unless otherwise stated.

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