The annual inflation rate in the United States eased to 2.3% in April 2025, marking the lowest level since February 2021, down from 2.4% in March and slightly under market expectations of 2.4%.
US inflation unexpectedly slows lowest since 2021
The latest data pointed to a continued cooling of price pressures across several key categories, reinforcing views that inflationary momentum is moderating in the face of tighter credit conditions and lingering global economic uncertainties. Energy costs declined by 3.7% year-over-year, accelerating from a 3.3% fall in March, as gasoline prices dropped more sharply (-11.8% vs -9.8%) and fuel oil prices also extended their declines (-9.6% vs -7.6%). However, natural gas prices bucked the broader energy trend, surging 15.7% compared to 9.4% previously, reflecting supply-side disruptions and unseasonably strong demand. Food inflation also moderated to 2.8% from 3%, while transportation costs slowed to 2.5% from 3.1%, both contributing to the overall easing of headline inflation. Shelter inflation, however, remained sticky at 4%, unchanged from the previous month, continuing to exert upward pressure on the index.
Categories with price increases
Conversely, certain categories saw a pickup in price increases, with used cars and trucks rising 1.5%, up from 0.6% in March, and new vehicles edging up 0.3% after being flat previously, indicating a possible bottoming out in the automotive sector. On a monthly basis, the Consumer Price Index (CPI) rose by 0.2%, rebounding from a 0.1% decline in March, although still falling short of the 0.3% increase anticipated by economists. Shelter costs climbed 0.3% month-over-month, accounting for over half of the total monthly gain, underscoring the sector’s outsized influence on the inflation basket. Energy prices also rose by 0.7%, as increases in the natural gas and electricity indices more than offset a continued decline in gasoline prices. Meanwhile, the annual core inflation rate, which strips out food and energy, remained steady at 2.8% for the third consecutive month, in line with market forecasts, highlighting persistent underlying price pressures despite the easing of headline inflation.
The data reinforced expectations that the Federal Reserve may adopt a cautious tone in the coming meetings, as inflation progress remains uneven across components, with certain sticky segments such as shelter and services inflation continuing to challenge the central bank’s 2% target.
