Finance

Here’s the inflation breakdown for March 2025 — in one chart

Published

2 days ago

April 10, 2025

David Paul Morris/Bloomberg via Getty Images

Inflation throttled back in March, largely on the back of lower gasoline prices — but tariffs threaten to reverse that downward trend in coming months while trouble also lurks in certain categories like groceries, economists said.

The consumer price index rose 2.4% for the 12 months ended in March, down from 2.8% in February, the U.S. Bureau of Labor Statistics reported Thursday, indicating that inflation decelerated.

Additionally, “core” CPI — a measure that strips out food and energy prices, which can be volatile — fell from 3.1% to 2.8%, the lowest level since March 2021. Economists prefer to look at core inflation to determine underlying inflation trends.

However, there are trouble spots like grocery prices and the Trump administration’s economic policy poses a significant headwind, economists said.

“It would have been a really good day,” Mark Zandi, chief economist at Moody’s, said of the CPI report. “But because of the tariffs, the trade war, it means nothing.”

He added that “it doesn’t reflect any of the tariffs being slapped on products around the world, particularly those coming from China.”

The consumer price index is a widely used measure of inflation that tracks how quickly prices rise or fall for a basket of goods and services, from haircuts to coffee, clothing and concert tickets.

CPI inflation has declined significantly from its pandemic-era high of 9.1% in June 2022.

However, it remains above the Federal Reserve’s target. The central bank aims for an annual rate around 2% over the long term.

Why tariffs raise prices

Tariffs, a tax paid by U.S. importers, add costs for businesses that ultimately get passed to consumers, economists said. Steel tariffs, for example, could make steel-intensive items like cars, homes and machinery more expensive, they said.

Tariffs “are going to be the main driver of inflation surging this year,” said Thomas Ryan, an economist at Capital Economics.

President Donald Trump on Wednesday backed down from imposing steep tariffs on dozens of trading partners, following a stock-market rout and surging U.S. government bond yields, which push down bond prices.

While Trump delayed so-called “reciprocal tariffs” for 90 days, all U.S. trading partners still face a 10% universal tariff on all imports. The exceptions — Canada, China and Mexico — face separate levies, however.

Imports from China are subject to a 125% tariff, for example. In response, China put 84% retaliatory tariffs on U.S. exports. Trump has also imposed product-specific tariffs on aluminum, steel, and automobiles and car parts.

“Many products that the U.S. imports are predominantly from China. Smartphones [73%], laptops [78%], video game consoles [87%], toys [77%], and also antibiotics for U.S. livestock production,” Wendong Zhang, professor of applied economics and policy at Cornell University, wrote in an e-mail to CNBC. “Resourcing from other countries will take time and result in much higher costs.”

Trump’s tariff policy will push the U.S. inflation rate to a peak around 4% by the end of 2025, Capital Economics estimates. That’s roughly double the Fed’s long-term target.

Vanguard Group projects a similar rise in inflation, particularly for goods prices. The money manager forecasts a 4% full-year 2025 inflation rate due to U.S. tariffs and retaliation by other nations.

Economists question whether the inflation impact will be short-lived (akin to a one-time price shock) or something more persistent.

Housing disinflation ‘set in stone’

Inflation was expected to continue its gradual decline in 2025 absent Trump’s economic policy, said Preston Caldwell, chief U.S. economist at Morningstar.

The trajectory of housing inflation is a major driver of that disinflationary trend, he said.

Inflation rate falls to 2.4% in March, lower than expected

Shelter is the largest component of the consumer price index, and therefore has an outsized impact on the direction of inflation. Annual shelter inflation eased to 4% in March, the smallest 12-month increase since November 2021, according to the BLS.

Housing disinflation is “something that’s sort of set in stone, at this point,” Caldwell said.

Gasoline prices tumble

Gasoline prices also tumbled in March. Prices at the pump declined 6.3% from February to March, after an adjustment for seasonal factors, according to the BLS.

Seasonally adjusted prices are down about 10% over the past year.

Oil prices plunged in early April, tied to fears of a global recession crimping demand, and gasoline prices are expected to throttle back further if the trend continues, economists said.

Groceries are a trouble spot

Trouble spots do remain, however.

Food prices were “the significant blemish” in the CPI report, particularly those for groceries, Zandi said.

According to BLS data, grocery prices rose 0.5% in the month from February to March, up from 0% the prior month, which is higher than the roughly 0.2% monthly move that economists say is needed to reach the Fed’s annual inflation target.

Egg prices jumped about 6% for the month and are up 60% in the past year, according to BLS data. That jump is largely attributable to a U.S. outbreak of bird flu, which has killed millions of egg-laying chickens and crimped egg supply.

Fed's Kashkari: Fed's first priority must be keeping long-term inflation expectations anchored

Prices for instant coffee have also surged, about 13%. Weather patterns like droughts fueled by climate change have disrupted major coffee growers like Brazil, reducing supplies of coffee beans.

However, the broad increase in grocery prices isn’t attributable to one factor or agricultural product, Zandi said.

It’s “worrisome” that food inflation has picked up even as diesel prices have fallen, a dynamic that would generally serve to hold down inflation due to lower transportation costs to grocery shelves, Zandi said.

“This inflation report had some highlights, and continues to have problem areas in food prices and energy components like electricity and natural gas,” Greg McBride, chief financial analyst at Bankrate, wrote Thursday morning. “But all this is looking in the rear-view mirror. With both inflation and the overall economy, uncertainty abounds about what might be lurking around the bend.”

Finance

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Published

1 day ago

April 11, 2025

Business Finance News

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Finance

March inflation drops to lowest point in more than 3 years

Published

1 day ago

April 11, 2025

Business Finance News

Egg prices keep soaring, but inflation is moving in the right direction. (iStock)

Consumer prices fell 0.1% in March, according to the Consumer Price Index (CPI) released by the Bureau of Labor Statistics (BLS). This is the first monthly drop since July 2022.

Annual inflation increased 2.4% compared to a 2.8% increase registered in February. Core inflation, which excludes volatile energy and food prices, grew at a pace of 2.8% over the last year, the smallest 12-month increase since March 2021. A decline of 6.3% in gas prices more than offset increases in the indexes for electricity and natural gas. Food, however, rose 0.4% in March. The meats, poultry, fish and eggs index rose 7.9% over the last 12 months and the price of eggs alone jumped 60.4%.

Inflation continues to move towards the Federal Reserve’s 2% target rate. Still, the impact of President Donald Trump’s implementation of new tariff measures could derail this progress and hinder economic growth, according to Jim Baird, Plante Moran Financial Advisors’ chief investment officer.

“As consumers brace for the impact of tariffs on prices on a host of staples and discretionary goods, there’s considerable uncertainty on what that near-term magnitude of the impact will be for growth and inflation, although the direction for each is clearer,” Baird said. “That’s sent economists scrambling to update their forecasts to lower growth and increase expected inflation for the duration of the year.”

Despite concerns about the effects of President Trump’s tariffs, the Fed continues to hold interest rates steady, and it’s not expected to make any significant changes soon, including a potential rate cut. While tariffs could lead to higher inflation and slower economic growth, the Fed is waiting for more clarity on the full impact of these policies before deciding on any course of action.

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Recession risks increasing

President Trump’s tariffs are also contributing to an increased risk of recession. Several major financial institutions, including Goldman Sachs and J.P. Morgan, have raised their recession probabilities. According to Baird, part of the problem is that as prices rise due to tariffs, consumers may decide to curb their spending.

“Sentiment has soured in recent months, and there are already signs of not only a more cautious mood but more constrained spending,” Baird said. “Prices may rise, but that doesn’t mean that consumers will pay any price for any product. Some may grumble but continue to spend, but many are much more likely to trade down to cheaper alternatives or delay discretionary purchases.

“That reality raises the probability of a more notable slowdown in the pace of the economy, with the risk of recession also rising,” Baird continued.

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Spring homebuying season looks promising

March shelter inflation data showed it dropped to 4.0% from 4.2% in February. That’s good news since shelter inflation has been a major force in keeping inflation elevated in recent years and could help move the needle on interest rates.

Mortgage rates continue to trend down, remaining under 7% for the twelfth consecutive week and could boost spring sales, according to Freddie Mac Chief Economist Sam Khater.

“As purchase applications continue to climb, the spring homebuying season is shaping up to look more favorable than last year,” Khater said.

The average 30-year fixed-rate mortgage was 6.62% for the week ending April 10, according to Freddie Mac’s latest Primary Mortgage Market Survey. That’s a decrease from the previous week, when it averaged 6.64% and lower than the 6.88% it was a year ago.

“Unfortunately, inflation remains painfully stubborn, well above the Fed’s 2% target for lowering rates,” said Gabe Abshire, Move Concierge CEO. “Considering the housing sector has lower exposure to the current global trade environment, it would be helpful for the Fed to lower rates and boost the Spring and Summer home buying market.”

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Finance

Tariff turmoil and bond market shock: More challenges ahead?

Published

1 day ago

April 11, 2025

Business Finance News

Inside the mystery of rising bond yields and why the sector is still attractive

A global trade slowdown tied to U.S. tariffs will likely create a more challenging environment for bond fund managers, according to financial futurist Dave Nadig.

“All of these capital holding requirements that led to buying U.S. Treasurys are kind of unwinding at the same time,” the former ETF.com CEO told CNBC’s “ETF Edge” on Wednesday. “So, the traditional math of things are bad for stocks, [and] everybody is going to buy bond just isn’t working out this time because the kind of shock we’re seeing is one we’ve never seen before.”

The benchmark 10-year Treasury Note yield increased to 4.4% on Thursday. The yield is up more than 10 percent just this week. Last Friday, it touched 3.86%.

Nadig thinks slowing trade will continue to impact market activity.

“When you have less trade, you need to finance less trade,” he said. “Historically, people have needed to finance dollars. That’s why every country in the world buys U.S. Treasurys. It helps them manage their international trade with the United States. So, if we’re slowing down the amount of international trade, we should expect in aggregate the holdings of bonds to probably come down.”