Inflation Cools to 2.4 Percent in March, Lowest in 6 Months

Declining energy costs fueled the better-than-expected inflation report.

A sign displays gas prices at a gas station in Chicago on May 21, 2024. Scott Olson/Getty Images

Falling energy prices helped U.S. inflation cool in March, slowing to its lowest level in six months.

According to the Bureau of Labor Statistics, the annual inflation rate declined to 2.4 percent from 2.8 percent in February, the lowest reading since September 2024.

Economists had penciled in a reading of 2.6 percent.

On a monthly basis, the consumer price index (CPI) fell by a better-than-expected 0.1 percent.

Core inflation, which excludes volatile energy and food prices, also eased to 2.8 percent. This is the first time that annual core inflation has been below 3 percent since early 2021.

The core CPI increased by 0.1 percent month-over-month, below the consensus forecast of 0.3 percent.

A significant contributor to the drop in inflation was the index for energy, which declined by 2.4 percent month-over-month. This sharp decline was fueled by a 6.3 percent decrease in gasoline prices. However, the prices of electricity and utility (piped) gas services increased by 0.9 percent and 3.6 percent, respectively.

Crude oil prices have fallen dramatically in 2025, sliding by more than 16 percent to about $60 per barrel.

While gasoline prices have experienced a recent uptick amid the summertime gasoline transition and refinery maintenance, they remain lower than they were a year ago.

Food prices rose by 0.4 percent from February to March, with supermarket costs climbing by 0.5 percent.

Egg prices rose by 5.9 percent in March and are up by more than 60 percent year-over-year.

Consumer egg prices remain elevated, but they cratered at the wholesale level. Since peaking above $8 per dozen early last month, egg costs have plummeted to roughly $3 per dozen, according to the Department of Agriculture.

This sizable drop was caused by declining demand and the U.S. government’s $1 billion five-point plan to stabilize egg markets.

The CPI report revealed renewed progress on the inflation front. New vehicle prices ticked up by 0.1 percent, but used cars and trucks slipped by 0.7 percent. Apparel rose by 0.4 percent, and transportation services plunged by 1.4 percent.

Shelter, which has driven a large share of CPI increases this year, was little changed in March. Shelter inflation slowed to 4 percent on a 12-month basis.

Supercore inflation excluding housing services—a metric used by the Federal Reserve to monitor inflation—fell by 0.2 percent and slowed to an annual rate of 2.9 percent.

Looking ahead to next month’s CPI report, the headline annual inflation rate and core inflation are seen coming in at 2.5 percent and 3 percent, respectively, according to the Cleveland Federal Reserve Bank’s Inflation Nowcasting Model.

Market Reaction

U.S. stocks were still deep in the red following the CPI report before the opening bell. The leading benchmark averages were down by more than 1 percent.

Treasury yields fell across the board, with the benchmark 10-year yield slumping below 4.32 percent.

The U.S. dollar index plummeted by more than 1 percent to below 102, adding to its more than 6 percent year-to-date decline. The index gauges the greenback against a weighted basket of currencies including the British pound and Japanese yen.

“What a difference 24 hours makes—not only is the immediate tariff threat pushed off for three months, but [the] imminent inflation threat has been avoided for now,” Chris Zaccarelli, chief investment officer for Northlight Asset Management, said in a note emailed to The Epoch Times.

Tariff Tumult

Moving forward, tariffs and their effects on inflation trends will be the topic of discussion. Economists and Fed policymakers will have debated whether U.S. levies—and potential retaliatory measures by other nations—will lead to a one-time price adjustment or persistent inflation pressures.

Another challenge for the U.S. central bank is navigating the noise: If inflation remained elevated, was it a result of tariffs or other underlying factors?

Chicago Fed President Austan Goolsbee discussed this during an auto industry symposium in February.

“If we see inflation rising or progress stalling in 2025, the Fed will be in the difficult position of trying to figure out if the inflation is coming from overheating or if it’s coming from tariffs,” Goolsbee said in a speech.

“That distinction will be critical for deciding when or even if the Fed should act.”

For now, the Fed is monitoring the net effect of the Trump administration’s policy changes, from trade to immigration.

Fed Chair Jerome Powell recently said monetary policy is well-positioned to respond to various scenarios, whether resuscitated inflation challenges or weaker economic growth.

Minutes from the March Federal Open Market Committee policy meeting revealed that policymakers are worried about tariff-driven inflation risks.

“Participants assessed that uncertainty around the economic outlook had increased, with almost all participants viewing risks to inflation as tilted to the upside and risks to employment as tilted to the downside,” reads the meeting summary, released on April 9.

However, based on President Donald Trump’s recent decision to impose a 90-day pause on reciprocal tariffs, many doom-and-gloom projections “can be dialed down a bit,” according to Mark Hamrick, senior economic analyst at Bankrate.

“The so-called 90-day pause doesn’t remove all uncertainty or potential negative impacts but is helpful,” Hamrick said in a statement to The Epoch Times.

“Fears about a huge pickup in inflation and near-term recession risks can be dialed down a bit.”

The next major inflation report will be the March producer price index, which measures the prices businesses pay for goods and services. Economists pay attention to this gauge as it can serve as a precursor to future inflation trends.