U.S. Core CPI Falls Slightly in March 2025

U.S. Core CPI Falls Slightly in March 2025

On April 10, 2025, the U.S. Bureau of Labor Statistics reported that the Core Consumer Price Index (CPI), which excludes food and energy prices, unexpectedly declined by 0.1% in March 2025 on a seasonally adjusted basis. This marked the first monthly decline in Core CPI since late 2020 and surprised analysts who had forecast a 0.3% increase.

The Core CPI is closely watched as it provides a more stable measure of inflation trends by filtering out the often-volatile food and energy categories. The March decline suggests that underlying inflationary pressures may be easing faster than previously anticipated, potentially signaling a shift in the overall economic momentum.

Year-over-year, Core CPI rose by 2.8%, down from the 3.1% recorded in February. This softening of core inflation could influence the Federal Reserve’s next moves, especially as it balances its dual mandate of controlling inflation and supporting economic growth. The central bank has signaled caution in recent months, and this data may strengthen the argument for holding or even reducing interest rates in upcoming meetings.

The decline in Core CPI was primarily driven by lower prices in transportation services and used vehicles, both of which saw sharp price drops. Meanwhile, the shelter component, which includes rent and owners’ equivalent rent, continued to rise but at a slower pace than in previous months.

Analysts are now debating whether this data point represents a short-term dip or the beginning of a broader trend of disinflation. If confirmed by future data, this could provide room for the Federal Reserve to ease monetary conditions without risking a rebound in inflation.

However, policymakers are likely to remain cautious, as wage growth and supply-side disruptions still pose potential risks to price stability. The coming months will be critical in determining the direction of U.S. inflation and the broader economic outlook.