Price increases subsided in March, going by the Federal Reserve's preferred metric, bringing annualized inflation closer to the central bank's target in the month before the brunt of President Trump's new tariffs took effect.

The personal-consumption-expenditures price index was flat last month, the Commerce Department said Wednesday. After stripping out variable food and energy costs, core prices also were flat. Analysts polled by The Wall Street Journal thought prices would be flat month over month, or up 0.1% on the core reading.

The cooler price increases pulled the 12-month PCE inflation rate down to 2.3%, or a core rate of 2.6%.

The figures reflect a drop in inflation that preceded Trump's announcement of a broad 10% across-the-board tariff, as well as searing new levies against Chinese imports. The inflation slowdown comes as no surprise, since other official price data released weeks ago feed into the PCE inflation calculation and make the figures relatively straightforward to forecast.

Economists are divided on how much and how quickly the tariffs could push prices higher in the months ahead.

Bets in financial markets show that investors are expecting a bump in inflation, but a relatively short-lived one. Some harbor fears that tariffs may sap the energy out of business investment and consumer spending, cooling the economy more than fueling price increases.

The Commerce Department's report showed that personal consumption increased by 0.7% in March, and that personal income grew by 0.5%. Analysts had been forecasting a 0.5% rise in consumption and a 0.4% increase in personal income.

Source : Dow Jones Newswires