Any day now, we will see the tariff inflation affect.

The Commerce Department on Friday reported that the personal consumption expenditures (PCE) index rose 0.1% on a monthly basis and 2.1% on an annual basis – the slowest growth rate since February 2021.

So actually, this was quietly in line with what most analysts suggested. There were some that were looking for more of a price hike (you know, from all of those awful tariffs), but mostly the consensus was it would be fairly mild. This number probably exceeded that consensus as well.

Interesting, the prices for "goods" was actually down 0.4% from last April, after a March number which also showed "goods" down 0.3%. Goods, of course, are the things that are supposed to go up as the tariffs kick in. But that doesn't appear to be happening.

What is up is services, which I am pretty sure are not affected by tariffs. So there doesn't appear (at least so far) to be much of an inflation effect from the tariffs. Unless people decided to raise their service prices just because. The only argument left to suggest that the tariffs are creating out of control inflation would be to suggest that inflation would have been down even more if not for those tariffs. The old Paul Krugman argument. A bad economy under a Democratic President would have been worse under a Republican and a good economy under a Republican President would have been even better under a Democrat.

But as the math shows, the affects of these tariffs would not really bring inflation up as much as people assume. Even if all costs were passed to the consumer (and they are not), the one time increase in pricing would still be below some of the normal inflation numbers we were seeing during the Biden years. If inflation is coming down, it is actually quite possible that it is coming down enough to swallow up any increases from the tariffs. What happens when the tariffs eventually go away (or are set at a lower number)? Well we could see a drastic inflation drop and possibly some rate cuts from the Government.