US inflation logs smallest annual rise in four years, core CPI up 2.8% YoY in April; Gold rebounds on bargain hunt

U.S. consumer prices rebounded moderately in April, leading to the smallest annual increase in four years, but the inflation outlook remains unclear against the backdrop of tariffs.

The rise in prices reported by the Labor Department on Tuesday was below economists' expectations and did not change their view that the Federal Reserve would continue to pause its interest rate-cutting cycle until late in the summer.

The data suggested that price pressures were cooling before President Donald Trump's sweeping import duties, whose impact is expected to become evident starting with consumer price data in May. Though the U.S. and China took a major step towards de-escalating their trade war over the weekend, a 10% blanket duty on almost all imports remains in place, as do sectoral tariffs.

That jump was partially offset by a 0.1% decline in food prices, which followed a 0.4% gain in March. Grocery store prices decreased 0.4%, the largest decline since September 2020, pulled down by a 12.7% drop in the cost of eggs. Egg prices, however, surged 49.3% from a year ago. Fruit and vegetable prices fell last month as did those for cereals and bakery products.

But prices for nonalcoholic beverages increased 0.7%.

Gasoline prices eased 0.1%, though consumers faced higher costs for natural gas and electricity. In the 12 months through April, the CPI climbed 2.3% after advancing 2.4% in the 12 months through March.

The data likely only captures tariffs, including a doubling of fentanyl-related taxes on all Chinese imports to 20% and a 25% levy on imported cars and light trucks, imposed before Trump's April 2 "Liberation Day" announcement.

The Trump administration has agreed to slash duties on Chinese goods to 30% for the next 90 days. Tariffs on U.S. goods imported into China would decline to 10% from 125%.

Economists still expect inflation to rise this year because of the tariffs, but probably not as sharply as they had anticipated before the 90-day truce between the world's two largest economies, allowing the U.S. central bank to maintain its wait-and-see policy stance. They also see the easing of trade tensions helping the U.S. economy to avert a recession, though growth was likely to be sluggish this year.

Shorter-dated U.S. Treasury yields eased slightly on the inflation data, while U.S. stocks were mostly trading higher. The dollar slipped against a basket of currencies.