In April, U.S. consumer prices rose at their slowest pace in over three years, with the Consumer Price Index (CPI) increasing 2.3% year over year, down slightly from March’s 2.4%. While this marks a modest reprieve, analysts caution that the full inflationary impact of former President Donald Trump’s tariffs has yet to take hold. Goldman Sachs noted that further price pressures are likely in the months ahead, leading them to expect the Federal Reserve to maintain its current interest rate stance for now.

Despite the slight cooling, inflation remains above the Fed’s 2% target. Core inflation, which excludes volatile food and energy prices, held steady at 2.8%. Housing costs, especially rent, remain a significant contributor, with shelter prices rising at 4%, near pre-pandemic peaks.

Tariff uncertainty continues to cloud the economic outlook. Consumers are increasingly worried about rising prices linked to trade policies, according to the Conference Board’s consumer sentiment survey. Economists expect Trump’s shifting tariff strategies to keep inflation data volatile in the near term.

While some consumer categories like fuel and groceries have seen price relief, this may be short-lived. Falling energy prices could reverse in the summer, and although egg prices have dropped, overall grocery costs remain elevated. A newly announced 90-day U.S.-China tariff pause may offer brief relief, but Americans still face a historically high average effective tariff of 17.8%.

Federal Reserve Governor Adriana Kugler warned that tariffs are distorting economic indicators, making it difficult to gauge true economic momentum. She projects that higher prices and reduced consumer purchasing power will likely dampen growth. Although Wall Street remained stable following the CPI report, the broader economy faces continued uncertainty amid complex trade dynamics and sticky inflation.