Airfare prices will drop ahead of summer travel season
Major airlines, including Southwest Airlines, United Airlines and Delta Air Lines, are also cutting flight schedules.
Scripps News
Another potentially encouraged inflation report this week could go back at least to the surprising source of information President Donald Trump’s sweeping tariffs.
Import fees are expected to dramatically increase prices in the next month or two months as businesses pass most of the additional costs to consumers.
But for now, collections have helped to curb inflation by increasing the fear of a global recession and overwhelm American finances and spending, at least for some services, said Ryan Sweet, US Economics President of Oxford Economics.
Of course, few predictors believe that a temporary decline in inflation is worthy of future recessions.
But this could make it even more difficult for Federal Reserve Chair Jerome Powell to explain why officials are still holding back market-friendly interest rate cuts, especially if employment growth starts to weaken this month.
“If you receive a report of unfortunate work and see the inflation counts well, the market will say, ‘Why don’t you cut off?'” Sweet said.
Trump again assaulted Powell on Thursday, calling him a fool who “has no clue” in a social media post. The Fed chose to stabilize interest rates on Wednesday, with Powell reiterating that Trump’s demand for low interest rates would not affect the Fed’s decision.
Is inflation really declining?
Some of the inflationary alignment effects of Trump’s tariff announcements have already been seen. In March, overall inflation fell to a five-month low of 2.4%, with volatile foods and energy items falling to 2.8%, falling in core majors, which has fallen to its lowest since March 2021, according to the Consumer Price Index. Each month, inflation remained virtually flat.
Trade wars were not necessarily the main reason for benign measurements. Used cars’ prices are up 4% per year, the lowest increase since January 2022, with forecasters predicting inflation slowing earlier this year as prices rise in early 2024 and generating a more favorable comparison with annual measurements.
However, the inflation-attenuated effects of tariffs could last and even expand in the April CPI report released Tuesday, with May being announced as well, Sweet said.
What are your expectations for the CPI in April?
Economists surveyed by Bloomberg said that inflation likely remained stable at 2.4% overall, but Barclays estimates it will be the lowest since February 2021, slightly above the Fed’s 2% target, but has fallen to 2.3%. The core major is projected to be at just 2.8%.
Other forces outside of tariffs may have contributed to mild inflation last month. Oxford said the gentle avian flu crisis has already dramatically reduced wholesale egg prices and could have filtered them to retail prices.
Here are the reasons why tariffs are curbing inflation:
Oil and gas prices
The collection significantly slowed trade and sparked concerns about a global recession, pushing US oil prices down to around $60 from $80 in January, just before Trump announced on April 2 that he would wipe out mutual tariffs.
That’s not the only reason for the price drop. OPEC agreed to increase oil production from April, noted Pooja Sriram, economist at Sweet and Barclays.
Petrol prices fell 6.3% in March, with Barclays estimated that they had immersed 0.4% more last month.
Airline fares and hotel rates
The trade war has discouraged foreign travel, particularly from Canada. Economist in capital economics, Stephen Brown wrote in a note to his client. Although US household spending is generally postponed despite consumer trust, Americans are beginning to ease their spending due to expensive items such as holidays, Sweet said.
It also spurs airlines to cut fares: falling oil prices have reduced jet fuel costs, he said.
Airline fares fell 4% in February and 5.3% in March. Barclays estimates it slides another 2% in April.
Such costs usually rise in the spring ahead of the summer travel season, Sriram said. She said Drop was probably “strung by emotion.”
Financial Services Fees
When the stock market was rounded to an all-time high in February, the fees charged by investment companies were based on the total holdings of swollen clients, which helped to fuel inflation.
However, despite recent gatherings, the tariff-led stock sale brought the S&P 500 index to about 8% off its peak in February. And the market remains unstable.
Such financial services fees do not have much weight in the CPI report, but are made on another inflation measure called the Personal Consumption Expense (PCE) Price Index, which is more closely followed by the Fed.
All of that, Sweet estimates, such an effect could limit annual inflation by about three-thirds of the rate next month or so.
However, he expects tariffs will start to push prices for second-hand cars and other items as early as June, but Sriram believes it will start to accelerate in July. Both economists expect core inflation to rise to around 4% by the end of the year.
“Inflation numbers will look better in April and possibly May,” Sweet said. “But there’s a boost from tariffs to inflation.”