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Tariffs hadn't raised the cost of living as of March, according to Wednesday's report on the Federal Reserve's preferred measure of inflation.

Consumer prices stayed flat in March after rising 0.4% in February, as measured by Personal Consumption Expenditures, the Bureau of Economic Analysis said Wednesday. Prices rose 2.3% over the past 12 months, the lowest annual inflation rate since October.

The data was broadly in line with forecasters' predictions of a 0% monthly increase and a 2.2% annual increase, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal .

The report on spending and inflation showed relatively mild price pressures ahead of President Donald Trump's major tariff announcement in April, which has yet to work its way through the economy. Economists largely predict that importers, who have to pay the taxes on items shipped from other countries, will pass those costs along to consumers in the form of higher prices.

Trump has said the tariffs are necessary to bring manufacturing back to the U.S., help fund the federal government and rebalance trade deficits .

But for now, the inflation slowdown echoed a similar trend in the Consumer Price Index data released earlier this month. As with the CPI, a drop in gas prices dragged down overall PCE inflation.

PCE Data Could Have Implications for the Federal Reserve

PCE inflation is especially significant for the economy because it's the preferred inflation gauge of officials at the Federal Reserve who are tasked with managing monetary policy to keep inflation under control.

Of special interest to the Fed is "core" inflation, which excludes prices for food and energy, because they can rise and fall for reasons other than broad inflation trends. Core inflation also rose 0% in March, less than the 0.1% median forecast. Core prices rose 2.6% over the year in March, more than the 2% annual inflation rate the Fed aims for.

Mild inflation could pave the way for the Fed to lower its benchmark interest rate , which it has held at a higher-than-usual level in recent years to combat the post-pandemic inflation surge. A lower Fed funds rate would translate into lower borrowing costs on all kinds of loans, which could help the job market stay afloat amid disruptions caused by tariffs.

However, Fed officials have been reluctant to move interest rates until the effects of Trump's trade policies on inflation and employment become clearer.

While prices stayed stable, consumers ramped up their spending significantly. Spending rose 0.7% in March, up from a 0.5% increase in February, and higher than the 0.5% jump forecasters had anticipated.

"This is likely more buying ahead of tariffs than a sign of healthy consumer demand," Scott Hoyt, an economist at Moody's Analytics, wrote in a commentary.

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