us inflation eases slightly: what does it mean for the fed and your investments?
Washington, D.C., Thursday, 10 April 2025.
the us consumer price index (cpi) for march has risen by 2.4% year-on-year, a tad below the expected 2.6%. this second consecutive month of slowing inflation could sway the federal reserve’s monetary policy, potentially impacting investment decisions, particularly in semiconductor stocks. core cpi, excluding food and energy, also edged down to 2.8%. after the cpi data was released the dollar index dipped and us stock futures saw a short-lived rally.
cpi data details
The U.S. Bureau of Labor Statistics reported a March CPI of 319.80 points, up from February’s 319.08 points [3]. The annual inflation rate decreased to 2.4% from 2.8%, falling short of the anticipated 2.6% [3]. On a monthly basis, the CPI experienced a decrease of 0.1%, which went against expectations of a 0.1% increase [3]. The core CPI, which excludes volatile food and energy prices, rose 2.8% annually in March, also below the projected 3.0% and the previous 3.1% [1]. The monthly increase in core CPI was 0.1%, lower than the expected 0.3% [1].
market reaction
Following the release of the March CPI data, the dollar index saw a short-term decrease of approximately 40 points, reaching 101.54 [1]. Simultaneously, U.S. stock futures experienced a brief surge, with the NASDAQ 100 index futures reducing their decline to around 1.8% [1]. The U.S. 10-year Treasury yield also experienced a short-term decrease, reaching 4.291% [1]. Spot gold prices showed minimal fluctuation, trading at $3,126.40 per ounce [1]. These initial market reactions suggest investors are reassessing their positions in light of the new inflation data [GPT].
fed policy implications
The Federal Reserve is closely monitoring inflation data as it assesses the need for potential interest rate cuts [2]. Nomura Securities anticipates only one rate cut by the Federal Reserve this year, expected in December [2]. Market expectations, as reflected in the CME FedWatch tool, currently lean towards three rate cuts within the year [2]. Lower-than-expected inflation data could bolster the case for earlier or more aggressive rate cuts, while higher-than-expected figures might reinforce the Fed’s commitment to prioritizing inflation control [4].
sector impacts and tariffs
The slower cpi increase may provide some relief before the full impact of tariffs is felt [5]. Deutsche Bank economists suggest that price pressures from tariffs on clothing imports from China may start to appear in the data [5]. UBS economists, however, believe the full effect of tariffs on consumer prices may take longer to materialize, based on observations from the 2018-2019 trade war [5]. Goldman Sachs and Deutsche Bank anticipate faster increases in prices for clothing, furniture, and electronics in the March CPI report due to these tariffs [4].
expert opinions and future outlook
Bloomberg economists Anna Wong and Chris G. Collins suggest the March CPI report presents mixed signals, with potentially continued disinflation in services but rising pressure on goods prices due to tariffs [4]. Goldman Sachs anticipates a 0.27% month-over-month increase in core CPI, lower than market expectations, and a 3.03% year-over-year increase, slightly above expectations [4]. They also foresee a 0.08% month-over-month increase in overall CPI, slightly below expectations, reflecting rising food prices and declining energy prices [4]. The University of Michigan consumer sentiment index will be closely watched for its inflation expectations and labor market sentiment [4].
potential gold surge
Edward Meir, an analyst at Marex, suggests that if the economy enters a period of slow growth, interest rates may eventually decrease, pushing gold prices higher [5]. He anticipates gold potentially reaching $3,200 by the end of April [5]. Lower-than-expected CPI data could increase the likelihood of a Federal Reserve rate cut in May, supporting a continued rebound in gold prices toward the $3,150 level [5]. Conversely, higher-than-expected inflation data could signal a pause by the Federal Reserve, negatively impacting gold [5].