By Gregory Heym, BHS Chief Economist and and host of Crossing The Line
Today, we celebrate our 250th edition of The Line and recover from the hangover we got celebrating the 90-day pause on "reciprocal" tariffs for most countries, with some good news on inflation. Welcome to a tariff-free edition of The Line.
Inflation Down More than Expected in March
That headline is enough to make almost anyone smile, and we certainly need all the good news we can get these days.
The consumer price index fell—yep, I said fell—0.1% last month and was 2.4% higher than a year ago. Both figures were below forecasts. The main reason for the monthly decline in CPI was a 2.4% decline in energy prices in March. “Core” inflation, which removes food and energy prices, rose 0.1% in March and 2.8% over the past year. Those figures were also below expectations.
There was also good news about shelter costs in the CPI, which rose just 0.2% last month, their lowest monthly increase since June 2024. The annual increase for shelter came in at 4.0%, the lowest reading since November 2021. Shelter costs have been a huge reason inflation has remained elevated, so this slowdown in price growth is perhaps the best news in this CPI report.
Another reason this report is good news is it makes it easier to cut rates if needed. With so many economists predicting a recession—they always spoil the party—the Fed may be forced to act as soon as their May meeting. March’s lower-than-expected inflation report will make it easier for them to cut, as they won’t be so concerned about stoking inflation.