US inflation came in much softer than expected in March, with headline CPI falling -0.1% mom, surprising markets that had forecast a 0.2% mom increase. Core CPI, which excludes food and energy, also underwhelmed with just a 0.1% mom gain, well below the anticipated 0.3% mom. The pullback was led by a -2.4% mom drop in energy prices, while food costs continued to climb, rising 0.4% mom.
On an annual basis, the CPI decelerated from 2.8% yoy to 2.4% yoy, lower than the expected 2.5% yoy. Core CPI also slowed to 2.8% yoy, down from 3.1% yoy, and marked the smallest 12-month increase since March 2021. The sharp drop in energy prices, down -3.3% yoy, played a significant role, although food inflation remained sticky at 3.0% yoy.
