Inflation declined in March for the first time in five years

Key takeaways

• Inflation sees rare decline: In March, the Consumer Price Index (CPI) fell by 0.1%—the first monthly decline in inflation in five years. This drop was mainly driven by a 6.3% decrease in gasoline prices.

• Mixed sector trends: While energy and medical care costs declined (energy index down 2.4%, medical care down 1.1%), food and shelter costs continued to rise. Grocery prices increased 0.5%, particularly in meat, poultry, fish, and eggs (up 1.3%), while the shelter index rose 0.2%, reflecting continued pressure on housing.

• Persistent food price pressures: Despite the overall decline in inflation, food costs—especially for groceries and dining out—remain a pain point for consumers. Grocery prices rose for the first time in two months, and restaurant prices climbed 0.4%, underlining ongoing affordability challenges in everyday expenses.

For the first time since the start of the COVID-19 pandemic, inflation went down instead of going up. The Consumer Price Index declined in March by 0.1% after rising 0.2% in February.

Over the last 12 months, the nation’s inflation rate is 2.4%, getting closer to the Federal Reserve’s target of 2%.

What changed? The Bureau of Labor Statistics reports the index for energy fell 2.4%, led by a 6.3% decline in the index for gasoline. That more than offset increases in the cost of electricity and natural gas.

The cost of medical care declined by 1.1% and is up just 1% on the year. The cost of transportation services fell by 1.4% after declining by 0.8% in February.

However, the tame inflation numbers might not feel so tame at the supermarket. The food index rose 0.4% in March. 

Food prices are still rising

The cost of food consumed at home – the category for grocery prices – rose 0.5% after being flat in February. Fruits and vegetables saw the biggest month-over-month decline, falling by 0.5%. 

The cost of bakery products, dairy and beverages all rose. The index for meats, poultry, fish, and eggs posted the largest one-month increase, rising by 1.3%, largely due to egg prices, which hit a record high of $6.23 per dozen.

The index for food consumed away from home – the category for restaurants – rose 0.4%, the same as the month before.

The cost of shelter also continued to rise, albeit at a slower pace. The shelter index rose 0.2% after a 0.3% rise in February. The cost of rent rose by 0.3% while the owner’s equivalent of rent rose by 0.4%.