A closely watched inflation gauge cooled last month in a sign that prices were steadily easing before most of President Donald Trump’s tariffs were implemented.

U.S. consumer spending increased solidly in March as households boosted purchases of motor vehicles to avoid higher prices and shortages due to tariffs, but that did little to change economists' views that the economy had shifted into lower gear.

Inflation cooled a bit last month, but don't expect interest rates to drop, too. Prices rose by 2.3% year over year in March, according to the latest Personal Consumption Expenditures data released Wednesday.

The U.S. economy shrank 0.3% from January through March, first drop in three years. It was slowed by a surge in imports as companies in the United States tried to bring in foreign goods before President Donald Trump imposed massive tariffs.

The U.S. economy is showing signs of weakness as President Trump's tariffs stir uncertainty. Recent data highlights the impact on inflation and financial markets, raising concerns about future economic stability.

The Commerce Department on Wednesday estimated that the U.S. economy shrank during the first three months of 2025, its worst performance in three years. The 0.3 percent contraction is a sharp decline from the 2.