The March 2025 Consumer Price Index of All Urban Consumers (CPI-U) report indicates that inflation declined by 0.1% for the month, reversing February’s 0.2% rise. These data were released at 8:30 am EST on Thursday, April 10, 2025, by the Bureau of Labor Statistics. Before seasonal adjustment, the year-over-year (Y-o-Y) inflation rate in the all-items index grew by 2.4%, a continued deceleration from 2.8% in February, 3.0% in January, and 2.9% in December.
The downside surprise was more welcome news, as the results missed economists’ consensus estimates. The table below is courtesy of Investing.com. The left column represents March’s figures, while the right column represents forecasters’ expectations. As you can see, the red metrics were weaker than anticipated.
Despite that, Fed Chairman Jerome Powell has maintained a cautious outlook and said on Apr. 4:
“While uncertainty remains elevated, it is now becoming clear that the tariff increases will be significantly larger than expected. While tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent. We are well positioned to wait for greater clarity before considering any adjustments to our policy stance. It is too soon to say what will be the appropriate path for monetary policy.”
As a result, while the data has cooperated recently, Powell still prefers further evidence of disinflation to warrant more rate cuts.
Gasoline, transportation services, and used cars and trucks drove March’s downside momentum, while shelter also slowed to 0.2% MoM.
Core inflation (which excludes the impacts of food and energy), rose by 0.1% in March, down from 0.2% in February and 0.4% in January. The indexes for airline fares, motor vehicle insurance, and recreation were among the primary laggards.
Food Prices
The food index jumped by 0.4% in March, after slowing to 0.2% in February. Although, two of the six major grocery store food indexes realized deflation:
- Cereals and bakery products (-0.1%)
- Meats, poultry, fish, and eggs (+1.3%)
- Dairy and related products (+1.0%)
- Fruits and vegetables (-0.5%)
- Nonalcoholic beverages (+0.6%)
- Other food at home (+0.5%)
Likewise, the food away from home index rose by 0.4%, as restaurant inflation remains resilient.
Energy Prices
The energy index fell by 2.4% in March, after rising by 0.2% in February and 1.1% in January. Gasoline prices sunk by 6.3%, while natural gas and electricity inflation jumped by 3.6% and 0.9%.
Core CPI
The March core CPI rose by 0.1% month-over-month and 2.8% Y-o-Y. Below is an itemized breakdown of the main price fluctuations seen in the core CPI reading:
- Shelter index: (+0.2%) [February: +0.3%]
- Rent index: (+0.3%) [February: +0.3%]
- Owners’ equivalent rent: (+0.4%) [February: +0.3%]
- Motor vehicle insurance: (-0.8%) [February: +0.3%]
- Medical care services: (+0.5%) [February: +0.3%]
- Physician services: (+0.3%) [February: +0.4%]
- Hospital services: (+1.1%) [February: +0.1%]
- Airline fares: (-5.3%) [February: -4.0%]
Seasonally Unadjusted CPI Data for March
Before seasonal adjustments, the CPI-U for March 2025 increased by 2.4% Y-o-Y to an index level of 319.799. Since these figures are unadjusted, they include regular seasonal price fluctuations that can create volatility in the results.
Who Blinks First?
Although Powell has preached patience when it comes to future rate cuts, the economic backdrop has become more precarious. With trade wars and stock market volatility intensifying, the sour sentiment could weigh on corporations’ investment decisions and eventually result in higher unemployment. As a result, the second half of the Fed’s dual mandate could dominate the longer the uncertainty persists.
Furthermore, the dichotomy in inflation expectations could have Powell looking in the wrong direction. For example, the University of Michigan’s latest Consumer Sentiment Report showed a material rise in Americans’ inflation fears. An excerpt read:
“As of March 2025, long-run expectations have climbed sharply for three consecutive months and are now comparable to the peak readings from the post-pandemic inflationary episode. They exhibit substantial uncertainty, particularly in light of frequent developments and changes with economic policy.”
Conversely, the 5y5y tells a different story. For context, the metric measures institutional investors’ five-year inflation expectation five years from today. If you analyze the right side of the chart below, you can see that the 5y5y has declined considerably in 2025 and remains near the Fed’s 2% long-run target.
Add it all up, and Powell has to decide whether he believes consumers or investors assessment of future inflation.
In the meantime, while stocks have gyrated, gold continues to outperform. And while developed-market central banks have large gold reserves, emerging market purchases could be the next catalyst to push prices higher.
The Goldman Sachs chart below shows how EM central banks have relatively small gold holdings. But, if they follow their DM counterparts and increase their allocations, the gold price could shine even brighter in the months ahead.
Are you thinking about diversifying into precious metals? Talk to your financial advisor about initiating a gold IRA account today, allowing you to invest in this red-hot asset on a tax-advantaged basis. Additionally, our complimentary CPI inflation calculator remains at your disposal, enabling you to assess inflation’s impact on your finances. Remember, seek the guidance of a financial advisor before making any investment decision.
In addition, if debt troubles have increased alongside the economic uncertainty, you’re not alone. Speaking with a professional can help you avoid bankruptcy and protect your credit score. To learn more, consult our list of debt management firms that can help get you back on track.
Alex Demolitor is a Canadian financial writer hailing from Halifax, NS. Alex has a Bachelors Degree from King's College and passed the CFA Exam Level III. He specializes in fundamental analysis of the stock, bond, commodity, and FX markets. He also covers US & Canadian economic indicators.
