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The inflation Indicator most valued by the Federal Reserve continued to cool in March, but the "Trump impact" has arrived.
Data released on Wednesday indicated that the core PCE price Index in the USA experienced a slight month-on-month decline in March, the first decline since 2020; however, with a series of tariffs coming into effect, the market generally expects inflation in the USA to rise in the coming months; this will also put the Federal Reserve in a dilemma.
USA's inflation unexpectedly "stalled" in March, and the economic 'breathing space' may not last.
On the eve of the official implementation of tariffs, mixed data has emerged from the USA economy.
"The rush to import has caused the USA economy to shrink for the first time since 2022: the initial value of Q1 real GDP annualized was -0.3%, and core PCE at 3.5% is the highest in a year.
Affected by the surge in imports before tariffs and weak Consumer spending, the USA economy declined by 0.3% in the first quarter, with imports hitting the largest increase in five years, net exports dragging down GDP by nearly 5 percentage points, government spending experiencing negative growth for the first time since 2022, and business equipment spending being almost the only highlight.
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The non-farm payrolls are coming in strong! If cracks begin to show in the USA labor market, the likelihood of the Federal Reserve lowering interest rates in June is expected to increase significantly.
The shadow of tariffs looms over the USA economy, with top Wall Street investment institution Apollo Global Management warning that Friday's non-farm report may highlight signs of weakness in the labor market.