• US inflation dropped to 2.3% in April 2025, the lowest rate recorded since February 2021.

  • The Federal Reserve held interest rates at 4.25%–4.5% in May amid tariff uncertainty.

  • April CPI rose just 0.2%, missing the 0.3% forecast and signalling easing inflation pressure.

Statistics from the U.S Bureau of Labour Statistics show the CPI rate went down to 2.3% in April. At 2.3%, this is the lowest inflation rate in the economy in over three years, when it last stood at 2.4% in February 2021. The revised CPI yearly figure also did not meet the expectations of the market analysts of 2.4%. When compared to both March and the expected figures, the total CPI in April rose marginally, having grown by 0.2% instead of the expected 0.3%.

The headline CPI, which includes food and energy prices, did not change as expected by the market from March’s 2.8% to April’s 2.8%. March 2021 had a higher core inflation rate than any other previous month. The numbers show that inflation is decreasing at a record pace in the United States, which is good for the economy amid high prices.

U.S. Federal Reserve Maintains Interest Rates the Same 

When inflation increased, the US Federal Reserve took no action in May 2025 and kept the rates steady at 4.25% and 4.5%. Their choice was also highly dictated by the possible impacts of tariffs on the economy. Jerome Powell, the Federal Reserve Chair, recently indicated that if the tariffs were to be held for longer, there could be increased inflation, slower growth, and an increased unemployment rate.

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Stabilising rates is something important to the Federal Reserve, and this is especially true when the US has problems with its trade partners such as China and the United Kingdom. The Fed was forced to take a neutral stand due to the balancing between controlling inflation and stabilising the economy. As long as the influence of inflation and trade on the overall economy continues, it is predicted that the Fed will reduce rates later this year.

The traders and analysts will observe the Federal Reserve's next move as the events unfold. According to the market expectations, the rates will not be altered before June 2025, the next date of the Federal Open Market Committee (FOMC).

Tariff Impacts on Inflation and Economic Growth

The U.S. is actively seeking trade relationships, especially with China, where a tariff has recently been imposed. One thing that the Biden administration has done is conduct trade with other nations like the UK, which was followed by talks to agree upon the terms of respective changes in the charges of essential goods such as vehicles, steel, and aluminium. These tariff conversations have directly impacted the rate of overall inflation and economic projections.

Economists and investment strategists, including BeiChen Lin from Russell Investments, have observed that businesses may have played around with inventories in preparation for tariffs, possibly counterbalancing instant pressures of inflation. Nevertheless, if the tariffs are not abolished or their level rises, they can exert a positive momentum on inflation.