Consumer Price Inflation—March 2025
What happened to inflation in March
March data dropped 0.1% month to month, bringing annual inflation to 2.4%, matching September 2024, which was the lowest since February 2021. The drop came from falling energy prices even as food prices rose. As tariff announcements shift the trade regime one way and then the opposite, concerns that inflation could reignite linger despite today’s fall in prices.
What else did we see in the March inflation data?
Core inflation—a measure that excludes food and energy prices and is considered a good gauge of underlying inflation—rose 0.1% in March, bringing the core inflation rate down to 2.8%, its lowest reading in four years.
Shelter inflation also continued to moderate, dropping from 4.2% in February to 4% in March. Market asking rents continue to ease, according to Realtor.com data, dropping for a 19th month in February, helping to reduce shelter inflation pressure. Looking ahead, however, multifamily permits dropped in 2024, suggesting that the flow of new multifamily construction that has kept rents steady could reverse in the years ahead. For now, a healthy under-construction pipeline may be sufficient to nudge shelter inflation back toward its immediate pre-pandemic range, which averaged 3.3% (from 2017–19).
What does this mean for homebuyers and sellers
With consumers expressing concern about their job security, against the backdrop of an on-again, off-again trade war, March inflation data was somewhat lower than expected, allowing the Fed to worry less about inflation. However, I don’t expect to see a big shift in monetary policy expectations as a result of this one reading. Attention is likely to continue to focus on the details of trade announcements. Although consumer surveys have faltered, the latest jobs report showed a still-sizable gain in company hiring. In a recent address, Fed Chair Jerome Powell noted that the Fed was likely to “wait and see” given that the economy is holding up relatively well and that policymakers are positioned to be able to react in either direction. Today’s data reaffirms that perspective.
As a result, I don’t expect big shifts in mortgage rates resulting from the March inflation data, but we may nonetheless see volatility ahead as businesses and consumers react to a shifting policy environment. In March, we saw sluggish pending home sales activity as consumers navigated uncertainty. Whether that persists as we move closer toward the heart of homebuying season, and the Best Time To Sell—which is next week—will depend on the resilience of American consumers and businesses and their expectations about what’s ahead.