By Ann Saphir (Reuters) -Tamer-than-expected inflation and a significant de-escalation of a U.S.-China trade war are easing fears of a sharp squeeze on American households and businesses in coming months,

The inflation backdrop improved in April, with a slight annual decrease reflected in the consumer-price index based on a 2.3% yearly rate. But that doesn't necessarily give the Federal Reserve an all-clear to cut rates next month,

TAMER-THAN-EXPECTED inflation and a significant de-escalation of a US-China trade war are easing fears of a sharp squeeze on American households and businesses in coming months, prompting Wall Street firms to pare predictions of a recession and giving the Federal Reserve room to leave interest rates where they are.

Americans saw some relief on inflation last month, though the trade war will likely push prices of everyday goods higher in the coming months. The consumer price index climbed 2.3% year over year in April,

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On Monday, Trump temporarily slashed tariffs on China from 145% to 30%. Levies on China will remain at the reduced rate for 90 days while the two sides negotiate a wider trade agreement, a joint U.S.-China statement said on Monday. China also agreed to temporarily cut its tariffs on U.S. goods from 125% to 10%.

The economic impacts of US President Donald Trump's ever-evolving tariff regime appear to be forcing the Federal Reserve into a policy corner.