March CPI Rises Less Than Expected
Core CPI Hits Lowest Since March 2021
Falling Gasoline Prices and Slower Housing Cost Increases Drive Trend
The U.S. consumer price index (CPI) inflation rate for last month slowed more than expected, marking the smallest increase in over four years. This is a positive sign indicating that inflation is stabilizing. However, since this data was recorded before the full implementation of the tariff policies under the Donald Trump administration, there remains a possibility that prices could rebound in the future.
According to the U.S. Department of Labor on the 10th (local time), the CPI for March this year rose 2.4% compared to the same period last year. This is the lowest level in 4 years and 1 month since February 2021, falling short of both February's figure (2.8%) and market expectations (2.5%). Compared to the previous month, it decreased by 0.1%, underperforming both the prior month's figure (0.2%) and the forecast (0.1%).
The core CPI, which excludes the volatile energy and food sectors, also rose by only 2.8% year-over-year, below both the previous month's 3.1% and the forecast of 3.0%. This is the lowest level in 4 years since March 2021. Month-over-month, it increased by 0.1%, falling short of both the prior month's 0.2% and market expectations of 0.3%. The core CPI is the inflation indicator that the Federal Reserve watches most closely, as it reflects the underlying trend in prices.
The slowdown in inflation was contributed to by a significant drop in gasoline prices and a deceleration in housing cost increases. By item, gasoline prices fell 6.3% month-over-month, causing total energy costs to drop by 2.4%. Housing costs, which carry the largest weight in the CPI calculation at one-third, rose by only 0.2% month-over-month, helping to slow the overall CPI increase. Housing costs rose 4% year-over-year, marking the smallest increase since November 2021. Used car prices fell by 0.7%, while airfare and auto insurance premiums dropped by 5.3% and 0.8%, respectively. Prescription drug prices decreased by 2%. Food prices rose by 0.4%, with grocery prices up 0.5% and dining out costs up 0.4%. Egg prices increased 5.9% month-over-month and surged 60.4% compared to a year ago.
While the March CPI release eased concerns about entrenched high inflation, the variable remains President Trump's tariff policies. After midnight the previous day, President Trump implemented reciprocal tariffs by country, but about 13 hours later, he granted a 90-day exemption for countries other than China. However, the base tariff of 10% remained in place, and tariffs on China were raised to 25%, taking effect immediately. Additionally, following the imposition of 25% tariffs last month on steel and aluminum and this month on imported automobiles, tariffs are planned to be applied to semiconductors, pharmaceuticals, and lumber in the future, making it quite possible that inflation could reignite going forward.
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