U.S. inflation eased in March, with consumer prices rising 2.4% from a year earlier, offering a fresh sign of cooling price pressures even as surging egg prices and escalating tariffs cloud the outlook. The data, released Thursday by the Bureau of Labor Statistics, showed the slowest year-over-year increase since early 2021 and came in below economists' expectations.
The decline in headline inflation was driven largely by falling energy costs, particularly a 6.3% drop in gasoline prices from February. But the broader picture revealed uneven pressures, with food costs climbing 0.4% month-over-month and egg prices soaring 60.4% compared to a year ago, due in large part to a bird flu outbreak that has severely curtailed supply.
Core inflation, which strips out the more volatile food and energy categories, rose 2.8% from a year earlier, the lowest pace in two years. On a monthly basis, core prices ticked up 0.1%. Shelter prices, a key driver of core inflation, rose just 0.2% in March-the smallest monthly increase in more than a year.
Other notable changes included:
- Airline fares: ↓ 5.3%
- Used vehicles: ↓ 0.7%
- Motor vehicle insurance: ↓ 0.8%
- Prescription drugs: ↓ 2%
The inflation report landed one day after President Donald Trump announced a 90-day pause on sweeping "reciprocal tariffs" against dozens of U.S. trading partners, temporarily capping the universal import tariff at 10%. However, the White House moved forward with a sharp escalation against China, raising duties on Chinese goods from 104% to 125% in response to Beijing's refusal to roll back its own retaliatory tariffs, which climbed to 84% this week.
While markets initially surged on news of the tariff pause-sending the Nasdaq up more than 12% and the Dow nearly 8% on Wednesday-economists warn that the remaining tariffs, particularly on Chinese imports, could feed new inflationary pressures.
Federal Reserve Chair Jerome Powell noted in March that Trump's earlier tariff measures contributed to the February uptick in consumer prices. Key indicators "still show a solid economy," Powell said Friday, but acknowledged that trade policy poses significant risks. The central bank's inflation target remains 2%.
Despite global market volatility and the growing threat of a trade-induced slowdown, March's inflation reading suggests some relief for households after years of elevated costs. The unemployment rate remains near historic lows and job growth in March exceeded expectations, offering signs of resilience in the broader labor market.
Still, analysts caution that tariffs-particularly on consumer goods and autos-could reverse recent gains. Used and new vehicle prices have yet to reflect anticipated cost pressures, but many expect an uptick in coming months if tariff levels persist.
Trump has continued to champion his aggressive trade stance. "Sometimes you have to take medicine," he said Wednesday, while adding that China "wants to make a deal, they just don't know how quite to go about it."
