March CPI Preview: Inflation Reading Sets the Stage Ahead of Tariff-Driven Storm

The U.S. Consumer Price Index (CPI) for March will be released on Thursday, April 10, at 8:30 AM ET, and it's shaping up to be a pivotal moment in the inflation narrative. While the reading won’t capture the effects of President Trump’s new tariff package that took effect earlier this month, it will serve as a baseline for the potential inflationary wave ahead. Markets are jittery, rate cut expectations are shifting, and investors will be parsing this report for any signs of sticky pricing pressure.

Ask Aime: What is the expected impact of the March CPI release on the U.S. stock market?

Here’s what to expect:

• Expected to rise 0.1% MoM, down from February’s 0.2%. Year-over-year (YoY) inflation is seen cooling to 2.8% from 3.1%.
• Core CPI (excluding food and energy): Projected to climb 0.3% MoM, up from February’s 0.2%. YoY, core inflation is forecast to decline to 3.1% from 3.3%.

The key storyline: sticky inflation and mounting tariff risks.

What to Watch:

• Core services, particularly shelter, continue to exhibit stubborn strength. Shelter inflation, which rose 0.3% MoM in February, will be a major focus—especially as it accounts for roughly one-third of core CPI.
• Tariffs Not Yet Reflected: The March report won't incorporate the 104% tariff on Chinese imports announced April 2. However, core goods could show early tremors, given the year-ago comparison includes lower-duty pricing.
• Base Effects: March 2024’s 0.4% MoM headline print will roll off the YoY calculation, opening the door for a modest deceleration in annual inflation, assuming this month’s reading stays subdued.

Sticky Inflation Is Still the Elephant in the Room

Ask Aime: "Will the March U.S. CPI show inflationary pressures?"

A majority of Federal Reserve participants flagged persistent inflation as a key risk in the latest FOMC minutes, and March’s CPI could support that caution. Several officials expressed concern that inflation might not fade as quickly as hoped, especially if tariff impacts prove durable. That’s bad news for those clinging to the “transitory” narrative and good reason for the Fed to stay cautious.

That said, headline CPI could see some relief from falling food and energy prices—eggs and gasoline both declined during March. Core goods might tell a different story, with upward pressure from apparel and household goods potentially linked to tariff expectations.

Markets Are Braced—And Still on Edge

Market reaction will be driven by whether CPI comes in “cool” or “hot” relative to consensus. Expectations are already tightly priced: the market is currently baking in three Fed rate cuts in 2025, down from five just a few days ago, following Trump’s tariff rollback comments. The VIX remains elevated around 30, suggesting traders still expect wide price swings in either direction.

If CPI surprises to the upside—particularly on core services or goods—it could re-ignite inflation fears and force markets to further unwind rate cut bets. Conversely, a soft report could fuel a relief rally, especially with equities already bouncing after Trump's apparent softening on trade.

The Road Ahead: All Eyes on April, May, and June

Even if March CPI is benign, the real inflation spike is likely coming. Economists expect tariffs to start filtering into the April data, with full impact likely peaking in May and June, where monthly core CPI could print as high as 0.5%–0.6%. With low base effects from spring 2024, that could push YoY core CPI north of 4% by July.

There’s also the possibility of a deflationary curveball if tariffs crimp demand, especially in housing. A sharp rise in unemployment or a pullback in shelter inflation could offset headline pressures—but that scenario remains speculative.

Final Thoughts

Thursday’s CPI print won’t settle the inflation debate, but it will sharpen it. If the data confirms sticky services and hints at rising goods prices, the Fed may find itself stuck between inflation that won’t quit and growth that’s already slowing. With elevated volatility, a fragile macro backdrop, and inflation policy hanging in the balance, the March CPI could be the calm before the tariff storm.

Hold on to your Treasury curves.