US inflation seen picking up in April as Trump tariffs begin to bite

US inflation is expected to tick higher in April, as fresh data is poised to reflect the early impact of President Donald Trump’s tariff spree—raising questions about the Federal Reserve’s next steps and rattling currency markets.

The Bureau of Labor Statistics will release the April Consumer Price Index (CPI) report today at 12:30 GMT (8:30 a.m. EST), a high-impact data point that could sway the Federal Reserve’s rate outlook and shift momentum in the US Dollar.

Forecast: Inflation likely to edge up again

Add WION as a Preferred Source

According to the Bureau of Labor Statistics, headline inflation is projected to come in at 2.4 per cent year-over-year in April, unchanged from March’s reading. However, on a month-over-month basis, prices are reportedly expected to rise by 0.3 per cent, reversing the 0.1 per cent decline seen in March.

As per Bloomberg, core CPI, which excludes volatile food and energy costs is also forecast to climb 0.3 per cent from the previous month, keeping the annual rate steady at 2.8 per cent, the same as March when core inflation hit a four-year low.

This view is echoed by a Bloomberg survey of economists, which forecasts a 0.3 per cent increase in both headline and core CPI in April. According to Bloomberg, the uptick marks a shift from March’s unexpected decline and signals that inflationary pressures are re-emerging as tariffs take hold.

Trump tariffs fiasco

President Trump’s “Liberation Day” announcement on April 2 unveiled sweeping tariffs on Chinese goods and several European imports. Although the administration later paused most new tariffs for 90 days, a 10 per cent duty on Chinese goods remains active and has started filtering through to prices.

According to Bloomberg, categories like toys, apparel, and household goods, many of which are heavily reliant on Chinese supply chains—could begin to reflect price hikes in April’s data, even if the full impact is expected to hit harder in Q3.

Fed takes a wait-and-watch approach

During the Federal Reserve’s May 7 policy meeting, the central bank left interest rates unchanged at 4.25 per cent–4.50 per cent. Fed Chair Jerome Powell acknowledged that “the risks of higher inflation and unemployment have risen,” but emphasized that it was not yet time to alter the policy path.

Powell noted that “near-term inflation expectations have increased due to tariffs” and that the Fed’s current stance allows room to observe how the data evolves, as reported by Reuters.

Washington's trade deal with UK & China

Adding complexity to the inflation outlook are recent US-China trade talks. Over the weekend, both sides announced progress in Geneva, agreeing to suspend some tariffs for 90 days. According to the joint statement, the US has cut tariffs from 145 per cent to 30 per cent, while China reduced duties from 125 per cent to 10 per cent.

Meanwhile, the “reciprocal” tariff rate of 10 per cent on British goods remains unchanged, the UK will benefit from exemptions for steel and cars, as well as increased market access for agricultural exports. The deal also leaves room for further negotiation down the line

This truce could ease pressure on global supply chains and retail importers, though its inflation-dampening effects are unlikely to appear in the April data.

With inflation caught between tariffs and slowing demand, the April CPI report may prove pivotal, not just for monetary policy, but for global markets still trying to price in the true cost of Trump’s trade war.