April CPI Preview: Economists Expect Modest Tariff Impact On Inflation

First-tier economic data, due before the market opens Tuesday, will be crucial in keeping the China trade deal-inspired rally alive.

The  Bureau of Economic Analysis (BEA) is all set to release its consumer price inflation (CPI) report for April at 8:30 a.m. ET.

Economists, on average, expect the monthly inflation rate to accelerate from March, while the annual rate is expected to hold steady, according to Investing.com. 

• CPI monthly inflation: 0.3% versus -0.1% in March
• Core CPI monthly inflation: 0.3% versus 0.1% in March
• CPI annual inflation: 2.4%, same as in March
• Core CPI annual inflation: 2.8%, same as in March.

Morgan Stanley economists led by Diego Anzoateguis estimated the core CPI to be 0.23% month over month, translating to an annual rate of 2.8%.

"We believe April will be the last weak print before we start to see the impact from tariffs with more clarity," they said. 

President Donald Trump announced sweeping tariffs on trading partners beginning in early April, although he backpedalled and suspended the levies on most nations, with the notable exception being China.

Tariffs on Chinese imports have also been paused mutually following a trade deal announced by the two countries on Monday.

The economists said an acceleration in new car prices may have been partly offset by another month of negative used car inflation and a decline in apparel prices.

They also predicted an acceleration in services inflation. 

On the other hand, Morgan Stanley predicted a deceleration in housing inflation.

In an interview with Yahoo Finance, BofA Securities analyst Stephen Juneau said, "It's probably the first month where we get a little bit of signs that we're seeing the impact of tariffs."

He expects the impact to be concentrated in orders due to the front-loading demand.

Juneau, therefore, remains below consensus on the numbers.

Federal Reserve Chair Jerome Powell ruled out any pre-emptive cuts after the central bank held rates steady last week. "It's not a situation where we can be preemptive, because we actually don't know what the right responses to the data will be until we see more data," he said.

In Tuesday's early premarket session, the Invesco QQQ Trust (QQQ) is down 0.56% at $504.99, and the SPDR S&P 500 ETF (SPY) has declined 0.44% to $580.40.

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