Finance

Here’s the inflation breakdown for March 2025 — in one chart

Published

2 months ago

April 10, 2025

David Paul Morris/Bloomberg via Getty Images

Inflation throttled back in March, largely on the back of lower gasoline prices — but tariffs threaten to reverse that downward trend in coming months while trouble also lurks in certain categories like groceries, economists said.

The consumer price index rose 2.4% for the 12 months ended in March, down from 2.8% in February, the U.S. Bureau of Labor Statistics reported Thursday, indicating that inflation decelerated.

Additionally, “core” CPI — a measure that strips out food and energy prices, which can be volatile — fell from 3.1% to 2.8%, the lowest level since March 2021. Economists prefer to look at core inflation to determine underlying inflation trends.

However, there are trouble spots like grocery prices and the Trump administration’s economic policy poses a significant headwind, economists said.

“It would have been a really good day,” Mark Zandi, chief economist at Moody’s, said of the CPI report. “But because of the tariffs, the trade war, it means nothing.”

He added that “it doesn’t reflect any of the tariffs being slapped on products around the world, particularly those coming from China.”

The consumer price index is a widely used measure of inflation that tracks how quickly prices rise or fall for a basket of goods and services, from haircuts to coffee, clothing and concert tickets.

CPI inflation has declined significantly from its pandemic-era high of 9.1% in June 2022.

However, it remains above the Federal Reserve’s target. The central bank aims for an annual rate around 2% over the long term.

Why tariffs raise prices

Tariffs, a tax paid by U.S. importers, add costs for businesses that ultimately get passed to consumers, economists said. Steel tariffs, for example, could make steel-intensive items like cars, homes and machinery more expensive, they said.

Tariffs “are going to be the main driver of inflation surging this year,” said Thomas Ryan, an economist at Capital Economics.

President Donald Trump on Wednesday backed down from imposing steep tariffs on dozens of trading partners, following a stock-market rout and surging U.S. government bond yields, which push down bond prices.

While Trump delayed so-called “reciprocal tariffs” for 90 days, all U.S. trading partners still face a 10% universal tariff on all imports. The exceptions — Canada, China and Mexico — face separate levies, however.

Imports from China are subject to a 125% tariff, for example. In response, China put 84% retaliatory tariffs on U.S. exports. Trump has also imposed product-specific tariffs on aluminum, steel, and automobiles and car parts.

“Many products that the U.S. imports are predominantly from China. Smartphones [73%], laptops [78%], video game consoles [87%], toys [77%], and also antibiotics for U.S. livestock production,” Wendong Zhang, professor of applied economics and policy at Cornell University, wrote in an e-mail to CNBC. “Resourcing from other countries will take time and result in much higher costs.”

Trump’s tariff policy will push the U.S. inflation rate to a peak around 4% by the end of 2025, Capital Economics estimates. That’s roughly double the Fed’s long-term target.

Vanguard Group projects a similar rise in inflation, particularly for goods prices. The money manager forecasts a 4% full-year 2025 inflation rate due to U.S. tariffs and retaliation by other nations.

Economists question whether the inflation impact will be short-lived (akin to a one-time price shock) or something more persistent.

Housing disinflation ‘set in stone’

Inflation was expected to continue its gradual decline in 2025 absent Trump’s economic policy, said Preston Caldwell, chief U.S. economist at Morningstar.

The trajectory of housing inflation is a major driver of that disinflationary trend, he said.

Inflation rate falls to 2.4% in March, lower than expected

Shelter is the largest component of the consumer price index, and therefore has an outsized impact on the direction of inflation. Annual shelter inflation eased to 4% in March, the smallest 12-month increase since November 2021, according to the BLS.

Housing disinflation is “something that’s sort of set in stone, at this point,” Caldwell said.

Gasoline prices tumble

Gasoline prices also tumbled in March. Prices at the pump declined 6.3% from February to March, after an adjustment for seasonal factors, according to the BLS.

Seasonally adjusted prices are down about 10% over the past year.

Oil prices plunged in early April, tied to fears of a global recession crimping demand, and gasoline prices are expected to throttle back further if the trend continues, economists said.

Groceries are a trouble spot

Trouble spots do remain, however.

Food prices were “the significant blemish” in the CPI report, particularly those for groceries, Zandi said.

According to BLS data, grocery prices rose 0.5% in the month from February to March, up from 0% the prior month, which is higher than the roughly 0.2% monthly move that economists say is needed to reach the Fed’s annual inflation target.

Egg prices jumped about 6% for the month and are up 60% in the past year, according to BLS data. That jump is largely attributable to a U.S. outbreak of bird flu, which has killed millions of egg-laying chickens and crimped egg supply.

Fed's Kashkari: Fed's first priority must be keeping long-term inflation expectations anchored

Prices for instant coffee have also surged, about 13%. Weather patterns like droughts fueled by climate change have disrupted major coffee growers like Brazil, reducing supplies of coffee beans.

However, the broad increase in grocery prices isn’t attributable to one factor or agricultural product, Zandi said.

It’s “worrisome” that food inflation has picked up even as diesel prices have fallen, a dynamic that would generally serve to hold down inflation due to lower transportation costs to grocery shelves, Zandi said.

“This inflation report had some highlights, and continues to have problem areas in food prices and energy components like electricity and natural gas,” Greg McBride, chief financial analyst at Bankrate, wrote Thursday morning. “But all this is looking in the rear-view mirror. With both inflation and the overall economy, uncertainty abounds about what might be lurking around the bend.”

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Finance

Swiss government proposes tough new capital rules in major blow to UBS

Published

1 day ago

June 6, 2025

Business Finance News

A sign in German that reads “part of the UBS group” in Basel on May 5, 2025.

Fabrice Coffrini | AFP | Getty Images

The Swiss government on Friday proposed strict new capital rules that would require banking giant UBS to hold an additional $26 billion in core capital, following its 2023 takeover of stricken rival Credit Suisse.

The measures would also mean that UBS will need to fully capitalize its foreign units and carry out fewer share buybacks.

“The rise in the going-concern requirement needs to be met with up to USD 26 billion of CET1 capital, to allow the AT1 bond holdings to be reduced by around USD 8 billion,” the government said in a Friday statement, referring to UBS’ holding of Additional Tier 1 (AT1) bonds.

The Swiss National Bank said it supported the measures from the government as they will “significantly strengthen” UBS’ resilience.

“As well as reducing the likelihood of a large systemically important bank such as UBS getting into financial distress, this measure also increases a bank’s room for manoeuvre to stabilise itself in a crisis through its own efforts. This makes it less likely that UBS has to be bailed out by the government in the event of a crisis,” SNB said in a Friday statement.

‘Too big to fail’

UBS has been battling the specter of tighter capital rules since acquiring the country’s second-largest bank at a cut-price following years of strategic errors, mismanagement and scandals at Credit Suisse.

The shock demise of the banking giant also brought Swiss financial regulator FINMA under fire for its perceived scarce supervision of the bank and the ultimate timing of its intervention.

Swiss regulators argue that UBS must have stronger capital requirements to safeguard the national economy and financial system, given the bank’s balance topped $1.7 trillion in 2023, roughly double the projected Swiss economic output of last year. UBS insists it is not “too big to fail” and that the additional capital requirements — set to drain its cash liquidity — will impact the bank’s competitiveness.

At the heart of the standoff are pressing concerns over UBS’ ability to buffer any prospective losses at its foreign units, where it has, until now, had the duty to back 60% of capital with capital at the parent bank.

Higher capital requirements can whittle down a bank’s balance sheet and credit supply by bolstering a lender’s funding costs and choking off their willingness to lend — as well as waning their appetite for risk. For shareholders, of note will be the potential impact on discretionary funds available for distribution, including dividends, share buybacks and bonus payments.

“While winding down Credit Suisse’s legacy businesses should free up capital and reduce costs for UBS, much of these gains could be absorbed by stricter regulatory demands,” Johann Scholtz, senior equity analyst at Morningstar, said in a note preceding the FINMA announcement.

“Such measures may place UBS’s capital requirements well above those faced by rivals in the United States, putting pressure on returns and reducing prospects for narrowing its long-term valuation gap. Even its long-standing premium rating relative to the European banking sector has recently evaporated.”