March Inflation - Better Than Expected Though Likely Stale

In March, consumer prices as measured by CPI, rose 2.4% compared to a year ago, down from 2.8% in February and below expectations for 2.6%. Core CPI (excludes volatile food and energy prices) rose 2.8%, down from 3.1% in February and 0.2% below forecasts.  Today’s report indicates a continued degree of relief after months of stalling progress on inflation, however, it does not fully reflect the price increases that may result from recently announced tariffs.  Looking forward and based on the current policy path, prices in key sectors are likely to experience a period of transitory inflation amid price increases on a variety of goods from food to clothing to automobiles.  These higher costs will test the resilience of consumers and the broader economy.  For its part, the Federal Reserve remains in wait and see mode until there is more clarity on the Trump administration’s policy agenda and the trajectory of inflation.

•  Consumer prices (CPI) increased 2.4% year-over-year. In March, the consumer price index (CPI) increased 2.4% – below expectations for 2.6% and down from 2.8% in February.  The cost of food (+3.0%) and shelter (+4.0%) were key contributors to the overall increase, more than offsetting declines in gasoline (-3.3%).  We continue to keep a close eye on shelter costs, which represent nearly one third of the consumer price index and tend to impact the index with a lag.  At +4.0% year-over-year, shelter inflation decelerated from +4.2% in February, down from a peak of 8.2% in March 2023.  Core CPI (excludes food and energy) increased 2.8% year-over-year, down from 3.1% in February and below expectations for 3.0%.  This is the lowest reading since March 2021.
•  Consumer prices (CPI) fell -0.1% month-over-month.  In March, consumer prices declined -0.1% month-over-month down from 0.2% in February. This is the first monthly decline since May 2020.  This result was -0.2% below the median market expectation of +0.1%.  Medical services increased 0.5% whereas energy was down -2.4%.  Core CPI (excludes food and energy) increased 0.1% month-over-month, down from 0.2% in February and below expectations of 0.3%.