As of April 2025, U.S. inflation, measured by the U.S. inflation rate, stands at 2.3%, while core inflation, excluding volatile food and energy prices, is at 2.8%. These figures align closely with the 25-year historical average for headline inflation (2.4%) and core inflation (approximately 2.3%), signaling a return to pre-pandemic stability after peaking at 9.1% in 2022. This convergence reflects effective Federal Reserve policies and easing supply chain pressures, with inflation now hovering near the Fed’s 2% target.
For Consumers:
This stabilization means improved purchasing power compared to recent years. Prices are rising more slowly, particularly for essentials like groceries (up 2.8% annually) and energy (down 3.2% year-over-year). Real average hourly earnings, up 1.4% from last year, provide some relief, allowing modest gains in living standards.
For Businesses:
Benefit from predictable pricing environments, enabling better planning for investments and wages. Lower inflation reduces pressure to pass on rapid cost increases, though sectors like housing and insurance (up 11.1% annually) face persistent challenges.
For Markets:
Viewed as a positive. The tame inflation data supports stable business conditions and potentially only modest adjustments will be needed by the Federal Reserve, all of which are a positive for both the stock and bond markets. Markets like stability as much as possible.
Sometimes average is good, and right now, core inflation is at its 25-year long-term average.
-Paul R. Rossi, CFA