The annual inflation rate in the US slowed more than expected in March. While the news of slowing inflation was welcomed by markets, uncertainty persists with the belief that tariffs will push up consumer prices. On Wednesday, US President Donald Trump announced he would be pausing higher reciprocal tariffs but was leaving a baseline amount of 10% in place. Many economies around the world have reached out to President Trump to negotiate a settlement to end the threat of tariffs.

• The inflation rate in the US declined to 2.4% in March from 2.8% in February. March’s rate came in below the 2.5% economists had expected, based on a Bloomberg survey. It was the lowest rate of inflation in the US since September 2024.
• Gasoline prices fell by 9.8% year-over-year in March, which drove the slowdown in the US inflation rate. The price growth for shelter and used vehicles slowed in March. Price growth for food accelerated.
• The core inflation rate, which excludes more volatile items, slowed to 2.8% in March from 3.1% in February. Core inflation reached its lowest level since March 2021.
• Consumer prices dropped by 0.1% in March over the previous month, their first decline since May 2020.
• The US Federal Reserve Board (Fed) released the minutes from its last meeting on Wednesday. Fed officials expressed concern about inflation persisting at elevated levels. Furthermore, tariffs could add to inflationary pressures. Therefore, the Fed plans to take a wait-and-see approach to adjusting monetary policy.

March’s decline in inflation was expected, but markets anticipate inflation picking up amid the tariffs. Investors still face mountains of uncertainty. However, they were encouraged that the US expressed its willingness to negotiate with other countries. While North American equity markets surged higher on Wednesday after the pause on reciprocal tariffs was announced, they pulled back yesterday. Markets could be choppy as trade talks evolve.

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