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Likely March Inflation Uptick May Clash with Trump Push for Lower Interest Rates
By Prathapan Bhaskaran - Apr 09, 2025, 01:44 AM ET
Consumer Price Index report scheduled for April 9 seen as benchmark for metrics after Trump tariff chaos
The inflation report scheduled for April 10 assumes importance in light of the market chaos and recession fears President Donald Trump’s tariff turmoil has ignited. This is because the Trump administration’s push for lower interest rates to revive the economy and calm market nerves rests on favorable inflation numbers. Federal Reserve chair Jerome Powell has been resisting interest rate cuts insisting that the inflations numbers need to come down from the current range close to 3%. Fed has been targeting 2% inflation.
The Trump team is banking on lower interest rates that will increase the amount of funds available for industries to borrow for building infrastructure to move production back to the country. Trump campaigned on the promise of moving production back to the U.S. soil by a stringent tariff regime. Washington has imposed a universal 10% tariffs on all imports to the U.S. and additional reciprocal tariffs. Trump has also threatened punitive tariffs on countries that go for retaliatory tariffs against Washington.
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Increasing inflation trend
Some experts expect the Consumer Price Index for March 2025 from the Bureau of Labor Statistics to show the upward trend that has continued for the previous two months. The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.2% on a seasonally adjusted basis in February, after rising 0.5% in January. Over the last 12 months, all items index increased 2.8% before seasonal adjustment, the report said, led by the index for shelter that accounted for nearly half of the monthly all items increase.
The shelter index increase was offset only by a 4% decrease in the index for airline fares and a 1 decline in the index for gasoline, indicating lesser travel and appetite to spend. Of particular worry for the administration would be the food price, which increased in February, rising 0.2%.
Geopolitical tensions are likely to keep energy prices buoyant, leading to further price rise, affecting inflation. Goldman Sachs has warned of a likely recession while JP Morgan Chase attributes a 60% chance of a recession this year.
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