U.S. inflation expected to ease, but tariffs are stealing the spotlight

A fresh report on U.S. inflation is expected to show a slight decline in price growth for March, but analysts say any results indicating such a slowdown probably don’t mean much anymore.

The Bureau of Labor Statistics on Thursday will release last month’s consumer price data, with forecasters predicting inflation having ticked down slightly. 

That decline would offer little respite from ongoing concerns that President Donald Trump’s unprecedented tariff plan — even after he softened it Wednesday — will bring rising prices in the coming months.

“Given how much more the president has increased tariffs on China, the effective [tariff] rate is not that different in totality,” Andy Schneider, senior U.S. economist at BNP Paribas, told NBC News after Trump’s surprise announcement easing some tariffs. 

Even before Trump’s shock tariffs announcement April 2, investors were predicting some run-up in consumer costs.

U.S. businesses “appear eager to pass on cost increases to consumers,” analysts with BNP Paribas wrote in a note to clients this week, citing a February Federal Reserve survey that found 80% of respondents would raise prices following higher input costs, with 60% stating the increase would at least equal the amount of the cost hike.

“These findings indicate both widespread impact and a strong likelihood that a majority of affected firms will pass cost increases through to consumers,” the analysts wrote. 

While the pause announced Wednesday means the economic fallout from Trump’s plan may not be as severe as feared, Wall Street firms continue to predict a dramatic slowdown in the economy as a result of the entire episode.  

In a note to clients following Trump’s pause announcement Wednesday afternoon, analysts with Goldman Sachs said they still predicted a 45% chance of a recession, with economic growth in 2025 slowing to 0.5% and 12-month inflation rising to as much as 3.5%. 

Thus, any improvement seen in Thursday’s report is likely to be largely ignored — while any increase in prices will be seen as a taste of what’s to come as the economic effects from the tariffs start to bite.

Trump has put his own spin on the situation, writing on his Truth Social platform this week that there was “no inflation” as oil prices and food prices were falling.

That is an outlier view — one not even shared by Trump’s own treasury secretary, who recently acknowledged on NBC News’ “Meet the Press” that there would be a “one-time price adjustment” from the tariffs, though he did not foresee “endemic inflation” persisting.

In remarks last week, Federal Reserve Chair Jay Powell warned inflation from the tariffs could prove more durable than what the administration may hope.

“We face a highly uncertain outlook with elevated risks of both higher unemployment and higher inflation,” he said at a Washington, D.C.-area event. “While tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent.”

Any reprieve in the pace of price growth would allow the Fed some breathing room to better manage the financial conditions Trump has imposed, Barclays Private Bank said in a note. Absent that, it will continue to be caught between stabilizing the economy and accommodating Trump’s policies. 

“Continued inflationary pressures are reducing the central bank’s ability to respond proactively to a deterioration in the growth outlook,” wrote Julien Lafargue, chief market strategist at Barclays Private Bank.