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US CPI Declines to 5% in March, Below Expectations

The US headline inflation rate decreased more than anticipated in March. The core price index, closely monitored by the Federal Reserve, experienced a slight acceleration due to increased shelter costs.

American woman doing grocery shopping
American woman doing grocery shopping

Annual CPI Falls to 5.0% from 6.0% in February

Data from the Bureau of Labor Statistics revealed that the consumer price index dropped to 5.0% in March from 6.0% in February annually, below economists' predictions of a decline to 5.2%.

Smallest 12-Month Increase Since May 2021

The 5.0% inflation rate represents the smallest 12-month increase since May 2021, though it remains above the Federal Reserve's target of 2%.

Monthly CPI Decreases to 0.1% from 0.4%

The month-on-month inflation figure dropped to 0.1% from 0.4%, falling short of the estimated 0.2% growth. The BLS attributed this to higher housing rents, which counterbalanced a decline in energy prices in March.

Core Inflation Edges Up to 5.6% Annually

The core inflation rate, which excludes volatile items such as food and energy, increased slightly to 5.6% from 5.5% every year. The monthly rate slipped to 0.4% from 0.5%, aligning with expectations.

Fed's Monetary Policy Tightening in Focus

Investors and Fed officials are paying close attention to the core price growth as they consider potential easing in the recent campaign of monetary policy tightening. The US central bank has been raising interest rates to combat soaring inflation. Still, financial market disruptions have led some to speculate about a possible slowdown in the current hiking cycle.

Impact on Possible May Fed Rate Hike

Kathy Jones, a chief fixed income strategist at Charles Schwab, stated that despite the lower-than-expected readings, the core level remains high enough to keep the possibility of a Fed rate hike in May alive.

Upcoming Release of Fed Meeting Minutes

Investors will look for more insights into future interest rate decisions when the Federal Reserve releases minutes from its latest meeting later today.