US Inflation Eases to 2.9% in April 2025, Marking Lowest Rate in Over Three Years

 The United States recorded a significant decline in consumer inflation, with the Consumer Price Index (CPI) dropping to 2.9% year-over-year in April 2025, the lowest since March 2021, according to data released on May 12, 2025, by the Bureau of Labor Statistics. The slowdown offers relief to households and policymakers grappling with economic pressures, signaling progress toward the Federal Reserve’s 2% target.

The CPI, which measures the cost of goods and services, rose 0.2% month-over-month, down from 0.3% in March. Core inflation, excluding volatile food and energy prices, held steady at 3.4%, reflecting persistent pressures in housing and healthcare. Key drivers of the slowdown included a 1.5% drop in energy prices, particularly gasoline, which fell 3% due to stable global oil supplies averaging $70 per barrel. Food prices rose modestly by 2.1% annually, with grocery costs stabilizing after 2024’s supply chain disruptions. Housing costs, a major CPI component, grew 4.8%, down from 5.5% in 2024, as rental demand eased in urban centers.

The decline follows aggressive Federal Reserve rate hikes, with the benchmark rate at 5.25%–5.5% since mid-2024, curbing demand. The labor market, with unemployment at 4.9%, supported wage growth of 3.8%, outpacing inflation and boosting real incomes. However, sectors like used cars (+1.2%) and airfares (+2.5%) saw price upticks, reflecting supply constraints. The Fed’s cautious stance, reiterated in its May 7 meeting, suggests rates may hold steady through June, with a potential 25-basis-point cut eyed for September if trends persist.

Consumers have felt relief, with retail sales growing 0.4% in April, driven by discretionary spending on electronics and clothing. However, small businesses face challenges, with 30% reporting higher borrowing costs, per the National Federation of Independent Business. Economists warn that global risks, including Middle East tensions and China’s economic slowdown, could disrupt oil and trade, threatening the outlook. For now, the 2.9% rate bolsters optimism for a soft economic landing, though vigilance remains critical as the Fed balances growth and price stability.