Inflation Continues, Pace Slows

US inflation rose 5% year-over-year in March, the smallest 12-month increase in nearly two years (see chart), according to government data released yesterday. The figure is lower than the 6% rate in February and marks the ninth consecutive year-over-year decline in the consumer price index—a measure of inflation that tracks the change in prices of a basket of goods and services (see 101).

Still, core CPI, which excludes volatile food and energy prices, rose 5.6% year-over-year, up from 5.5% in February and the first increase since September. Housing costs, which make up roughly one-third of the calculation, were the largest contributor to the annual inflation rate, rising 8.2% year-over-year. The costs of energy and used vehicles declined. See data here.

While inflation remains above the Federal Reserve's 2% target, analysts say the report shows continued signs of decelerating. The Fed has raised interest rates nine times since 2022 to slow down the economy and is due to consider what might be the last of its rate hikes in May.