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Inflation as measured by the Consumer Price Index (CPI) came in better than expectation for the month of March. Headline CPI fell -0.1% (market expected a rise of +0.1%), as a result of energy costs falling 2.4%. This is best CPI report since May 2020.

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Even when excluding food & energy (core CPI), the results were much better than expectations. Core prices increased +0.1% (street was expecting a rise of +0.3%) in March, the slowest pace of price increases since January 2021.

Breaking it down by category, 6 consumer categories saw prices increase while 4 declined. The biggest price increases came within the medical care services (+0.5%), food (+0.4%) & apparel (+0.4%). While the decliners were led by energy (-2.4%), & transportation services (-1.4%). Only one category (energy) is down year over year.

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Annual CPI fell from from 2.8% to 2.4%. Remaining below the long term average (orange line) of 3.5%.

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While Core CPI fell from 3.1% to 2.8%. Remaining below the long term average (orange line) of 3.7%, but still above the Fed’s target (grey line) of around 2%.

Bottom line: good news here but core inflation is still higher than the Fed would like it. And its possible the market is looking ahead to some near term increases in inflation due to the tariff uncertainty.

While its nice to see stocks rising again, I wouldn’t get too excited just yet. We are paying about 20x current earnings estimates that will probably need to be revised lower.

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