According to the Bureau of Labor Statistics, annual inflation fell to 2.3% from 2.4% in March, marking the smallest year-on-year growth since February 2021.
Monthly price growth remains moderate, with title and core inflation each rising 0.2%, lower than economists’ expectations.
The increase in CPI was driven primarily by higher housing costs (+0.3%) and energy prices (+0.7%), partially by the household food index.
“This is another well-behaved CPI inflation report (the third consecutive) that shows good goods and energy inflation,” said Scott Anderson of BMO.
Tariff risks are imminent as markets watch cautiously at potential Fed cuts in September
TD’s Thomas Feel team members noted that despite Trump’s grand tariffs in April, its impact has not yet been achieved, although this situation may change in the coming months.
“Although commodity prices were also higher last month, there was little evidence that the rise was driven by a large number of tariffs announced by President Trump in early April,” he said. “Companies’ efforts to stock inventory and their willingness to absorb certain tariff costs suggest that a strengthening commodity price could increase in the coming months.”
Anderson noted that this is the third CPI report this year showing “favorable temperance” that opens up the possibility of the Federal Reserve’s reduction rate in 2025.
“It may be insufficient to move the Fed from the off-market soon, but it does make the possibility of cutting some tax rates later this year,” he wrote. “Feder funding futures are now fully priced between two to three-thirds of the reduction rate in 2025, with the first most likely to appear in September.”
Even a slight month of growth in U.S. inflation could put up pressure on Canadian interest rates, which in turn put pressure on mortgage costs.
After inflation data, the 5-year bond yields in U.S. Treasury bonds and Canada rose, with the U.S. 10-year period of 10 to 4.50%, and Canada’s 5-year increase of 0.02% to 2.82%.
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Brett Surbey Economic Data Economic Indicators Reduce U.S. CPI U.S. Provides U.S. Inflation to U.S.
Last modified: May 13, 2025
