Inflation Report April 2025: Gas Prices Surge, Core Inflation Slows – What to Expect

March 2024 Consumer Price Index Reveals Mixed Inflation Signals

Updated April 9, 2024: Includes new insights from leading economists.

Highlights You Should Know

• The upcoming March CPI report is projected to show a rise in overall inflation to 3.5% year-over-year, up from 3.2% in February.
• Core inflation, excluding volatile food and energy prices, is expected to decelerate slightly, signaling easing price pressures.
• Spiking gasoline prices have pushed inflation higher, whereas falling used car prices have moderated core inflation.
• The report’s outcomes will heavily influence Federal Reserve decisions on timing and scale of interest rate cuts.

On Wednesday, the Bureau of Labor Statistics will release the official Consumer Price Index data for March. This key economic indicator reflects changes in the cost of living and is closely analyzed by policymakers and markets alike.

Economists surveyed by Dow Jones Newswires and the Wall Street Journal anticipate an annual inflation rate increase from 3.2% to 3.5%, driven primarily by sustained price growth in housing and services sectors, as noted by Kayla Bruun, senior economist at Morning Consult.

Despite the uptick in headline inflation, core inflation—an essential gauge that omits food and energy prices—is forecasted to grow at a slower pace, rising 0.3% in March compared to 0.4% in February. The year-over-year core inflation rate is expected to decline slightly to 3.7% from 3.8%.

Core Inflation Trends and Energy Price Impact

Core inflation is considered a more stable measure of underlying price trends because it excludes frequently fluctuating food and energy costs. The divergence between overall and core inflation is largely attributed to recent sharp increases in gasoline prices, which have risen more than typical seasonal patterns, drawing consumer attention as highlighted by Bank of America Securities economists Stephen Juneau and Michael Gapen.

Conversely, used car prices—a significant component of both core and overall inflation—have decreased, exerting downward pressure on the core inflation rate.

Federal Reserve’s Response and Market Implications

The Federal Reserve closely monitors inflation data to guide monetary policy. While officials are preparing for interest rate reductions, they emphasize that cuts will only occur once inflation shows clear signs of sustained decline.

Should the inflation report align with expectations, it may pave the way for the Fed to begin easing rates as soon as June, potentially lowering borrowing costs on mortgages and credit cards that currently remain near multi-decade highs.

However, if inflation surprises on the upside, it could delay rate cuts or even compel the Fed to consider raising rates beyond the current 23-year peak—a scenario recently mentioned by Federal Reserve Governor Michelle Bowman.

Stay informed and prepare your finances accordingly as these inflation dynamics unfold.

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