Inflation was slightly lower than expected in April as President Donald Trump’s tariffs just began hitting the slowing U.S. economy, according to a Labor Department report Tuesday.

The consumer price index, which measures the costs for a broad range of goods and services, rose a seasonally adjusted 0.2% for the month, putting the 12-month inflation rate at 2.3%, its lowest since February 2021, the Bureau of Labor Statistics said. The monthly reading was in line with the Dow Jones consensus estimate while the 12-month was a bit below the forecast for 2.4%.

Excluding volatile food and energy prices, core CPI also increased 0.2% for the month, while the year-over-year level was 2.8%. The forecast was for 0.3% and 2.8% respectively.

The monthly readings were a bit higher than in March though price increases remain well off their highs of three years ago.

Shelter prices again were the main culprit in pushing up the inflation gauge. The category, which makes about one-third of the index weighting, increased 0.3% in April, accounting for more than half the overall move, according to the BLS.

After posting a 2.4% slide in March, energy prices rebounded, with a 0.7% gain. Food saw a 0.1% decline.

Used vehicle prices saw their second straight drop, down 0.5%, while new vehicles were flat. Apparel costs also were off 0.2% though medical care services increased 0.5%.

Egg prices tumbled, falling 12.7%, though they were still up 49.3% from a year ago.

While the April CPI figures were relatively tame, the Trump tariffs remain a wild card in the inflation picture, depending on where negotiations go between now and the summer.

In his much-awaited “Liberation Day” announcement, Trump slapped 10% duties on all U.S. imports and said he intended to put additional reciprocal tariffs on trading partners. Recently, though, Trump has backed off his position, with the most dramatic development a 90-day stay on aggressive tariffs against China while the two sides enter further negotiations.

Markets expect the president’s softening position to lead to less of a chance of interest rate cuts this year. Traders had been expecting the Federal Reserve to start easing in June, with at least three total reductions likely this year.

Since the China developments, the market has pushed out the first cut to September, with just two likely this year as the central bank feels less pressure to support the economy and as inflation has held above the Fed’s 2% target now for more than four years.

The Fed relies more on the Commerce Department’s inflation gauge for policymaking, though CPI figures into that index. The BLS on Thursday will release its April reading on producer prices, which are seen as more of a leading indicator on inflation.

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TEGERNSEE, GERMANY — Top German business leaders, economists and politicians descended onto a small, picturesque Bavarian town situated next to the iconic Tegernsee lake last week to share their hopes and discuss what’s at stake for the new government.

Buoyed by recent positive market sentiment for Europe’s largest economy, attendees at the summit were united in their call for the new administration to step up and honour campaign promises. Any missteps would likely not be tolerated, with some business leaders warning the government cannot allow itself a “lazy summer.”

Despite rain and low hanging clouds providing a somewhat dreary backdrop to the event, which has been dubbed the “Davos of Germany,” the promise of new beginnings enveloped the summit and the atmosphere was buzzing with excitement for potential changes the newly-appointed Chancellor Friedrich Merz could initiate.

Big expectations for the government were commonplace, with concerns about Germany’s struggling economy and recent political turmoil seemingly having faded into the background.

The German DAX index is currently up over 18% since the beginning of this year, frequently hitting record highs in recent months. The German economy has however been in stagnation territory for over two years now, with tensions over economic, fiscal and budget policy in the previous ruling coalition and its eventual breakup continuing to weigh on expectations.

“There are very high hopes now on the new government,” Patrick Trutwein, chief risk officer and chief operating officer at the IKB Deutsche Industriebank AG, said during a panel moderated by CNBC’s Annette Weisbach.

He said he was feeling positive about Germany’s future considering the announcement of the major fiscal package enshrined in Germany’s constitution, as well as further potential reforms ahead and “an economy that’s pretty robust and can build on its own … productivity and competencies.”

Matthias Voelkel, CEO of Boerse Stuttgart Group, was among those feeling hopeful.

“If we look ahead and if they [the new government] do the right thing, I’m optimistic,” he told CNBC.

Audi CEO Gernot Döllner meanwhile said in a fireside chat that he was hopeful that the new government would “send an impulse into the German economy.”

The mood was also upbeat in Germany’s auto sector, which has long been struggling with competition from China, pressures from the transition to electric vehicles and has recently been hit by U.S. tariffs.

“The Germans are back,” Hildegard Müller, president of the German Association of the Automotive Industry, told CNBC’s Weisbach Friday. “We are competitive,” she added.

But amid the positive buzz, it was clear that observers are keeping a close eye on the governments every move.

“This new government in Germany cannot allow itself a political lazy summer, I’m sorry, they’ve got to work and they’ve got to work hard,” said Karl-Theodor zu Guttenberg, chairman of Spitzberg Partners and former German politician.

Or as Veronika Grimm, member of the German Council of Economic Experts, told CNBC: “A lot lies ahead for the government.”

Overal the message was clear: Germany needs to get its act together.

Alexander Horn, general manager of Eli Lilly‘s Germany arm — Lilly Germany — said the business strongly welcomes the new government’s goals, but won’t tolerate any caveats.

“Specifically we expect that the declarations of intent that are in the coalition agreement will be implemented quickly, speed plays an enormously big role,” he said during a panel, according to a CNBC translation.

Boerse Stuttgart Group’s Voelkel indicated his optimism relied on action from the government, saying he was looking for moves towards “less bureaucracy, less anti-growth regulation, more innovation and particularly strengthening investment.”

The newly minted German government has set itself many of these points as policy goals, making promises to boost the country’s economy, reduce bureaucracy and boost innovation and investment during the election campaign and in its coalition agreement.

“This country needs an economic turnaround. After two years of recessions the previous government had to announce again [a] zero growth year for 2025 and we really have to work on this,” German economy minister Katherina Reiche told CNBC on the sidelines of the summit.