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Inflation in the U.S. cooled last month ahead of large-scale changes to trade policy. Prices, as measured by the Consumer Price Index for All Urban Consumers (CPI-U), rose 2.4 percent year-over-year in March, a steep drop from the 2.8 percent increase recorded in February. Core inflation, which excludes the volatile food and energy categories, also cooled with prices increasing at the slower annual rate of 2.8 percent in March compared to 3.1 percent in February.

At 2.4 percent, annual inflation came in lower than the 2.6 percent expected by economists in a recent FactSet survey. A 9.8 percent annual decrease in the price of gasoline drove much of the change, with airfare and certain consumer goods also playing a role. The decrease is a welcome development since newly announced U.S. tariffs, and uncertainty on their implementation, may drive up prices in the months ahead.

Utility gas, housing, and food away from home (i.e. meals at restaurants) saw the largest year-over-year price increases of three percent or more. Medical care, food at home (i.e. groceries), electricity, recreation, alcoholic beverages, new and used cars, household furnishings, apparel, and education services saw increases of less than three percent. Gasoline and other transportation expenses (largely airfare) saw prices decline.

The next release of CPI data will be on Tuesday, May 13, 2025.

Prepared by Greater Houston Partnership Research.

Colin Baker
Manager of Economic Research
bakerc@houston.org

Clara Richardson
Analyst, Research
crichardson@houston.org