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Inflation is moderating, and prices are starting to come down. On April 10th, 2025 the U.S. Bureau of Labor Statistics announced that the Consumer Price Index (CPI) for all items rose 2.4% over the last 12 months before seasonal adjustments. For comparison, the CPI in February 2025 was up 2.8% over the prior 12 months. This 2.4% figure is getting close to the Federal Reserve’s target inflation rate of 2%. That’s good news for consumers, assuming we set aside all other trade-related and economic factors.

Although CPI gets a lot of attention, the Fed’s preferred inflation measure is the Personal Consumption Expenditures (PCE) Price Index. So, we will wait and see how the PCE numbers look when they are released later this month.
The Federal Reserve’s dual mandate is to promote maximum employment and stable prices. If inflation continues trending toward the 2% target, the Fed may have more room to focus on supporting jobs and potentially stimulate the economy if needed. While not the Fed’s go-to measure, the CPI still gives us a helpful snapshot, and it’s currently signaling that price pressures may be easing.

One of the biggest declines was in energy costs. Energy commodities dropped 6% in March alone and are down 9.5% for the year. Gasoline prices are down 9.8% year-over-year (see Chart 1). The energy market is driven by supply and demand: prices tend to fall when supply increases faster than demand. During periods of slower economic activity, energy demand typically drops, which can push prices lower. The recent decline in energy prices may reflect a broader economic slowdown.

Housing costs are also showing signs of cooling. Shelter prices rose just 0.2% in March 2025, compared to 0.3% in February and 0.4% in January (see Chart 2). Elevated home prices and high interest rates are keeping homes unaffordable. Meanwhile, food prices remain volatile and are up 3% year-over-year.

Overall the total inflation is moving in the right direction, and that is encouraging for consumers. But if this trend is driven by weakening economic activity, we could be looking at a more complex situation ahead.

References:
U.S. Bureau of Labor Statistics. Consumer Price Index Summary released on April 10, 20205. https://www.bls.gov/news.release/cpi.nr0.htm#cpi_pressa.f.1

Disclosures:
The analysis is based on historical data and future expectations that may not be correct. This paper was written as an opinion only. The data is not guaranteed to be accurate or complete. Please consult with your financial advisor before making an investment decision. Neither ECNFIN.COM nor its author is responsible for any damages or losses arising from any use of this information. Past performance doesn’t guarantee future results.

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