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The latest CPI report shows that U.S. inflation slowed to 2.3% in April—its lowest annual pace since early 2021. The drop comes even as President Trump’s new round of tariffs on Chinese goods begins to filter into the economy. While economists caution that tariff effects often take months to fully materialize, this reading signals that the underlying disinflation trend remains intact for now.

This report gives the Fed breathing room. With inflation cooling and growth holding steady, policymakers may pause further hikes—if not open the door to cuts. But don’t get too comfortable: tariff-driven cost pressures are still building in the background. We’re positioned for a market that favors rate-sensitive sectors in the short term, but also hedges against a potential second wave of inflation if supply chain costs surge later in the year.