Inflation in the United States unexpectedly cooled in April, with the consumer price index rising 2.3% over the year, down from 2.4% in March. This marks the smallest increase since February 2021 and brings inflation closer to the Federal Reserve's 2% target.

The monthly increase in the consumer price index was 0.2%, lower than the expected 0.3%. Core CPI, which excludes volatile food and energy prices, also rose 0.2% for the month, holding steady at 2.8% over the year.

Notably, the impact of recently implemented tariffs has not yet significantly affected inflation data. The index for new vehicles remained unchanged, while the food index saw a slight decline.

The energy index, however, surged 0.7% in April following a 2.4% decline in March. Over the year, energy prices are down 3.7%.

The Federal Reserve had previously decided to hold interest rates steady, citing uncertainty around the impact of new tariffs. Market expectations, as reflected in CME FedWatch data, show a 92% chance that rates will remain unchanged at the next Federal Open Market Committee meeting in June.

While the Trump administration has announced trade deals with China and the UK, reducing some tariffs, a baseline 10% tariff remains in effect for most countries. Federal Reserve Chair Jerome Powell has warned that if large tariff increases are sustained, they could lead to higher inflation, slower economic growth, and increased unemployment.

Despite these concerns, Powell noted that the economy remains resilient, with a solid job market and inflation just above the Fed's target. The central bank's current policy stance is considered less restrictive than it was last fall, allowing for a wait-and-see approach.

As the situation continues to develop, policymakers and economists will be closely monitoring inflation data for signs of tariff impacts and overall economic health.