March CPI Anaylsis

The consumer price index (CPI) of February and early March has served as a strong indicator of the economic performance of the Trump administration thus far.

The CPI, with a degree of unexpectedness, declined from 3% to 2.8% at the end of February, meaning that the rate at which prices increased declined, or that the inflation rate is cooling. Additionally, some additional data from the report showed a steep decline in egg prices, from a height of over $8 a dozen to now around $5.50.

Many economists and investors alike did not anticipate this to happen in the first place. President Trump, Secretary of State Lutnick, Secretary of the Treasury Bessent, among others prioritized equipping the nation with high import duties on all types of goods from all across the world, starting with Canada and Mexico and then branching off elsewhere. Many believed that higher duties would increase the cost to import, and subsequently raise prices and inflation. Additionally, with the government taking much heat for proposing tax cuts, economists believed that these would raise the deficit, thus leading to more money printing and inflation.

Two things could contribute to this sudden decrease in prices. First of which are high interest rates; initially wanting to cut rates tremendously, President Trump soon into his presidency cave into Fed Chair Jerome Powell's eagerness to keep rates high to limit the uptick in inflation from late last year, with some small rate cuts in between. The continued steepness of these interest rates have reduced the ability for the government to borrow and, thus, kept inflation from ticking up.

Secondly is the dip in energy prices. Like what the president has been campaigning on for years leading up to his 2024 election victory, Trump was quick to slash environmental regulations, leave the Paris Climate Accords, and hand out offshore oil permits in an attempt to raise the supply of oil and subsequently lower prices. This, albeit with a lot of criticism from environmentalists and progressives, actually succeeded, as gas prices fell for the third consecutive week. In fact, in some states like Ohio, gas prices have reached their lowest levels since the deflationary environment of the pandemic, wherein prices were exceptionally low.