US Inflation Cools to 2.4% in March, Core Rate Hits Four-Year Low

nflation in the United States slowed more than expected in March 2025, offering some relief to consumers and policymakers alike. According to the latest data from the Bureau of Labor Statistics, the consumer price index (CPI) dropped 0.1% month-on-month, bringing the annual inflation rate down to 2.4% from February’s 2.8%.

Core inflation, which excludes volatile food and energy prices, rose just 0.1% in March, translating to a 2.8% annual rate—the lowest since March 2021. Economists had predicted a 2.6% headline inflation rate and 3% for core inflation.

A major factor behind the decline was falling energy prices. Gasoline costs plummeted by 6.3%, leading to an overall 2.4% drop in the energy index. In contrast, food prices rose by 0.4% in March, with egg prices alone soaring 5.9% in one month and up over 60% from a year ago.

Housing, another key contributor to inflation, showed signs of slowing. Shelter prices increased by just 0.2%, marking a 4% annual rise—the smallest since late 2021. Prices for used vehicles declined 0.7%, and new vehicles were only marginally more expensive, up 0.1%.

Airfare saw a significant decline of 5.3%, and other categories such as motor vehicle insurance and prescription drugs also dropped, contributing to the overall cooling.

The financial markets responded cautiously, with stock futures and Treasury yields both dipping following the data release. Market expectations for interest rate cuts remained largely unchanged, with traders still anticipating three to four cuts by the end of 2025.

This report comes amid uncertainty around trade policy. President Donald Trump recently delayed the implementation of certain tariffs initially set to affect a wide range of imports, keeping only a blanket 10% duty in place while allowing for a 90-day negotiation period. While tariffs typically raise costs, this move has created some uncertainty around the near-term inflation outlook.

Despite the cooling data, the Federal Reserve remains cautious. Analysts suggest the Fed may still hold off on cutting interest rates until at least June, as it balances inflation data with broader economic signals.

Experts believe the recent CPI numbers provide temporary relief but may not reflect future trends, especially with potential price increases tied to tariff effects still looming. With activity slowing and inflation dipping, the Fed faces a tough decision ahead.