Inflation eased in March to 5%, but core prices remain stubbornly high

Inflation showed welcome signs of cooling in March as the cost of gasoline declined, but core prices pointed to strong underlying price pressures that are still bubbling beneath the surface.

The Labor Department said Wednesday that the consumer price index, a broad measure of the price for everyday goods including gasoline, groceries and rents, rose 0.1% in March from the previous month. Prices climbed 5% on an annual basis. Those figures were both lower than forecasts by Refinitiv economists. 

It marked the slowest annual inflation rate since May 2021. Still, inflation remains about three times higher than the pre-pandemic average, underscoring the persistent financial burden placed on millions of U.S. households by high prices. 

Other parts of the report also point to a slow retreat for inflation, a worrisome sign for the Federal Reserve. Core prices, which exclude the more volatile measurements of food and energy, climbed 0.4%, or 5.6% annually. That is up slightly from February's 5.5% increase, snapping a five-month-long streak of declines.

The report is the last before the Fed's next policy-setting meeting on May 2-3 and will have major implications for the U.S. central bank, which is tightening monetary policy at the fastest rate in decades as it tries to crush out-of-control inflation.