the staff of the Ridgewood blog
Ridgewood NJ, inflation in April stayed surprisingly steady, even as experts warned that new tariffs could drive prices higher. According to a report released Friday by the U.S. Commerce Department, the Personal Consumption Expenditures (PCE) Price Index — the Federal Reserve’s preferred inflation gauge — rose just 0.1% for the month.
That brings the annual inflation rate to 2.1%, the lowest of 2025 so far.
Key April Inflation Highlights
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PCE Inflation (Monthly): +0.1%
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PCE Inflation (Annual): 2.1% (vs. 2.2% forecast)
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Core PCE (Excludes Food & Energy): +0.1% MoM | 2.5% YoY
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Consumer Spending: +0.2%, down from +0.7% in March
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Personal Income: +0.8%, beating the +0.3% forecast
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Personal Savings Rate: Climbed to 4.9% (highest in nearly a year)
Why Did Inflation Stay Low?
Although President Trump’s new tariffs took effect early in April, their impact hasn’t yet been felt in consumer prices, experts say. These price shifts often take time to work through the supply chain before showing up at the checkout counter.
Additionally, food prices fell by 0.3%, offsetting a 0.5% increase in energy goods and services. Shelter costs, one of the most persistent inflation components, rose by 0.4%, keeping core inflation elevated even as overall inflation moderated.
Consumer Spending Slows as Savings Jump
Americans tightened their wallets in April, with consumer spending slowing to just a 0.2% increase, compared to 0.7% in March. The data suggests growing caution among consumers, further evidenced by a notable increase in the personal savings rate, which jumped to 4.9% — the highest level in nearly a year.
Income Rises More Than Expected
On a more positive note, personal income surged by 0.8%, significantly higher than the 0.3% estimate. This increase may give consumers more financial flexibility in the months ahead — assuming inflation remains under control.
What It Means for the Fed
The Federal Reserve closely monitors the core PCE — which excludes the more volatile food and energy sectors — as a barometer for long-term inflation trends. With the core rate at 2.5%, just below expectations, the Fed may view this as confirmation that inflation is slowly cooling, though not completely tamed.
Bottom line: Despite fears of rising prices due to tariffs, inflation in April was mild, consumer spending slowed, and savings rose — pointing to a potentially cautious economic outlook for the months ahead.
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