When the inflation report came out in April 2025, it was even harder to believe the news. Approximately 76 percent of the decline was driven by falling prices for necessities—including groceries and gasoline. Annual inflation as measured by the consumer price index (CPI) rose to 2.3% from a year earlier as of last month. This is down from the 2.4% increase seen in March. The recent retreat in inflation raises the hopes of consumers and policymakers alike. Further, it is a sign that the economy might be past the worst of the volatility.
Mark Zandi, chief economist at Moody’s, stressed the importance of these conclusions, and told all stakeholders to “soak this report in.” The recent CPI data continues a consistent trend of inflation pressures easing across the board, especially in sectors hitting American families the most.
This helped keep core inflation, which excludes volatile food and energy prices, at 2.8% in April, not moving much at all. Housing costs, the biggest piece of the CPI, moderated as well, but are still blistering at a 4% annual rate. While these are promising moves in the right direction, the overall inflation picture remains concerning.
Gasoline prices actually fell by 0.1% from March to April, seasonally adjusted. This reduction contributed to lowering inflation. A 0.5% drop in used car and truck prices and a 0.2% decline in apparel prices contributed as well. Airline fares contributed a notable 2.8% drop. This month’s inflation report showed a sizable drop. A record 13% plunge in egg prices was key to pulling the entire index down.
Economic experts warn that outside forces can easily snuff out this encouraging trend. In particular, the risks of the current tariff policy are profound. Sarah House expressed concern over tariffs, stating, “I think tariffs are the biggest question mark over the inflation outlook.” She elaborated on the uncertainty surrounding trade, noting that “there’s all this tremendous trade uncertainty and we have higher tariffs pretty much across everything we import.”
Under the current tariff structure, we start with a baseline rate of 10% on the majority of U.S. trading partners. For imports from China, that steepness is even worse—at least 30%. Furthermore, targeted products like steel, aluminum, and many imported cars are already hit with tariffs up to 25%. Fitch echoes a caution raised by many economists that these tariffs risk resparking inflationary pressures after a brief lag. A 10% mean tariff rate might increase the CPI by as much as one percentage point. This change could start to be felt in as little as six to nine months.
Making things more confusing still though, is the estimated financial burden of these tariffs on American families. New calculations show that the typical American family will pay $2,800 more. This dramatic leap is largely due to the newly imposed import taxes on them, making such an impact in the short term.
Mark Zandi remarked, “It felt like we could just about declare victory on putting inflation back in the bottle, and it’s back out again.” His remarks illustrate a tempered optimism as the economy continues to steer through high and uncertain inflation, global turmoil and other headwinds.
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