Inflation rises just 0.1% in March and 5% from a year ago as Fed rate hikes take hold

Inflation cooled in March as the Federal Reserve’s interest rate increases showed more impact, the Labor Department reported Wednesday.

The consumer price index, a widely followed measure of the costs for goods and services in the U.S. economy, rose 0.1% for the month against a Dow Jones estimate for 0.2%, and 5% from a year ago vs. the estimate of 5.1%.

Excluding food and energy, core CPI increased 0.4% and 5.6% on an annual basis, both as expected.

The data showed that while inflation is still well above where the Fed feels comfortable, it is at least showing continuing signs of decelerating. Policymakers target inflation around 2% as a healthy and sustainable growth level. The headline increase for CPI was the smallest since June 2021.

A 3.5% drop in energy costs and an unchanged food index helped keep headline inflation in check. Food at home fell 0.3%, the first drop since September 2020.

A 0.6% increase in shelter costs was the smallest gain since November, but still resulted in prices rising 8.2% on an annual basis. Shelter makes up about one-third of the weighting in the CPI and is being watched closely by Fed officials.