Inflation rose at its slowest rate in nearly two years, the Bureau of Labor Statistics said Wednesday, April 12. The overall consumer price index rose 5% in March on an annual basis, the lowest it has been since May 2021. Meanwhile, month to month inflation cooled to a 0.1% increase for March, down from 0.4% in February.

Headline inflation came in slightly better than expected. Core inflation, which excludes volatile food and energy prices, rose 5.6% annually and grew 0.4% from the month prior, exactly as expected.

Food as a whole was flat from February to March, but remains 8.5% higher than it was one year ago. Groceries, meanwhile, fell 0.3% on a monthly basis, the first decline since September 2020. Eggs were a big driver in bringing down grocery prices, falling 10.9% since February.

Energy prices also drove down headline CPI, falling 3.5% since February and 6.4% annually. The price of gasoline has come down 17.4% in the last 12 months.

The monthly drops in energy and food helped drive down the headline number below core inflation. Strip out food and energy and core inflation is climbing, in large part due to the cost of housing, a lagging indicator.

The shelter index rose 0.6% since February and 8.2% year over year. The Bureau of Labor Statistics said the shelter increase accounts for more than 60% of the total increase in core inflation.

Transportation services also rose 13.9% in the last 12 months. Car insurance alone jumped 15% year over year.

While 5% headline inflation is the lowest rate in nearly two years, it is still well above the Federal Reserve’s target of 2%. Also, the central bank tends to look at core inflation numbers over headline numbers when determining inflation policies.

The Fed has raised its federal funds rate from near zero to around 5% in the last 12 months. Wall Street is still expecting one more 25-basis-point increase at May’s Federal Open Market Committee meeting, which would bring the target range to 5%-5.25%.