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Headline inflation was down but some core measures are slower to decelerate.

March’s Consumer Price Index for All Urban Consumers (CPI-U)—the headline inflation number—was up a seasonally adjusted 0.1% over February, a decided move down from the 0.4% increase that February saw. Before seasonal adjustment, that was a 5.0% increase year-over-year, according to the Bureau of Labor Statistics, the lowest 12-month increase since May 2021.

The biggest contributor “by far” was, again, shelter, more than offsetting a 3.5% drop in energy prices over the previous month.

Core inflation—taking out the volatile food and energy sectors—was up 0.4% in March, compared to 0.5% in February.

“Core services inflation excluding housing, on which the Fed is lasered focused, was up 0.4% m/m in March, a touch softer than the 0.5% gain in February,” said Oxford Economics in an emailed note. “Growth in the Fed’s preferred measure is still running hot as it didn’t rise more than 0.4% anytime in 2019.”

“Calmer inflation means lower mortgage rates, eventually,” said National Association of Realtors Chief Economist Lawrence Yun in an emailed statement. “The 5% consumer price inflation in March is a steady improvement from 9% last summer, 8% in autumn, 7% during Christmas, and 6% in the early months of this year. The ideal inflation of 2% is still maybe a year away, but this directional improvement is a clear signal to the Fed to change its tightening monetary policy, especially considering that many regional banks are still on the edge of further interest rate risk blowup.”

Yun emphasized the importance of the deceleration in the rent component. “Though still up by a whopping 8.8% from a year ago, the monthly gain was much lighter at 0.45% compared to the 0.7% to 0.9% monthly gain over the past year,” he said. “It was inevitable for rent growth to soften, considering the robust apartment construction. Mortgage rates slipping down to under 6% looks very likely towards the year’s end.”

But what does it all mean to the Fed and, therefore, the rest of the economy?

“These are good signs the cruise ship is changing direction,” said Clark Kendall, president and CEO of Kendall Capital, though in the short term “we’ll see a wake from those sudden moves that will create some waves in the economy.”

As far as the Fed goes, while there is progress, it’s unlikely to be enough. The organization continues its concern that the historical inflation fight, easing of rates, and then reversal and upward prices rush again of the 1980s could repeat itself, undoing all the progress. Figure on a 25-basis point increase in May. Then? Still to be seen.