Headline inflation continues to fall as core inflation rises

March marked the ninth consecutive month of falling headline inflation, according to the Labor Department’s Consumer Price Index report released Wednesday.

THE consumer price index rose 5% in the past 12 months to March, compared to 6% in February. It’s the lowest annual increase in nearly two years, a welcome sign for consumers and the Federal Reserve. Prices for all goods and services rose 0.1% for the month, compared to a 0.4% increase in February.

But this overall CPI includes fuel and food, the prices of which are volatile. The slowdown mainly reflects the impact of lower fuel prices, which have fallen sharply since their peak in June 2022. Energy costs have fallen 3.5% from the previous month and 6.4% over the past year. The directory food index remained unchanged from the previous month, but is still up 8.5% from a year ago.

So don’t rejoice just yet — core annual inflation, which excludes food and energy, rose from 5.5% in February to 5.6% in March. This is the first annual rise in core inflation in nine months. The month-over-month increase was little changed: 0.4% in March compared to 0.5% in February.

The data sends mixed signals to the Federal Reserve, which has been the main opponent of inflation. In the Fed’s efforts to control inflation, the Central Bank has raised the federal funds rate nine times since March 2022. Headline CPI peaked at 9.1% in June 2022 and has since declined, but the the Fed’s long-term inflation target is 2%.

The Fed is expected to add an additional rate increase at its May meeting.

Here are some other notable price changes from the March CPI report: