Inflation fell nearly a percentage point to 5% in the year ending in March, the Bureau of Labor Statistics reported Wednesday in an update to the consumer price index, the lowest such rate since May of 2021.
The drop in headline inflation is welcome news for an economy wracked by soaring prices for several years. Prices rose just 0.1% on a month-to-month basis, that is, just from February to March, less than economists expected.But the details in Wednesday's report suggest that underlying inflationary pressures remain strong. Much of the decline in the inflation rate was attributable to energy prices falling by 3.5%. But oil prices have risen significantly since March.
"[H]eadline inflation has slowed lower than expectations, but the core reading is outpacing it, suggesting that underlying inflation is coming down much more slowly," Nigel Green of deVere Group said. The Federal Reserve, which is in the middle of a historic campaign to raise interest rates to slow economywide spending and curb the price gains, has been looking for confirmation that inflation is headed down toward its 2% target — which has been exceeded for all but the first full month of Biden’s tenure as president.
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