The Cost of Living in 2025: Why Prices Still Feel Too High

Every trip to the grocery store or gas station in 2025 still feels more expensive than it should. For many Americans, inflation isn’t just a headline — it’s personal. The April Consumer Price Index (CPI) report, released in mid-May, confirms what people have been feeling for months: the cost of living is still rising, even if it’s not accelerating. Prices in April were up 3.4% year-over-year, slightly higher than economists expected. That’s a problem for consumers, the Federal Reserve, and an economy already facing questions about long-term stability.

Core inflation, which excludes food and energy, came in at 3.6%, showing that price pressures are still widespread. Shelter costs, which make up a third of the index, remain stubbornly high, rising at nearly double the Fed’s target pace. While gas prices ticked down slightly and food prices plateaued, other essentials like insurance, rent, and services are picking up the slack. For middle-income households, wage growth is no longer enough to offset these increases.

This presents a dilemma for the Federal Reserve. The central bank has kept interest rates steady since late 2024, hoping to strike a balance between cooling inflation and avoiding a recession. But with April’s report, hopes for a rate cut anytime soon are fading. Markets have now pushed back expectations for relief, and mortgage rates are still hovering around 7%, choking the housing market and making borrowing expensive across the board.

There’s also a psychological shift underway. In recent surveys, more Americans say they expect inflation to stay elevated for years. That expectation itself can drive further price increases, as businesses preemptively raise prices and workers demand higher wages. It’s a feedback loop the Fed is watching closely — and one that may shape interest rate policy into 2026.

So what does the April data really tell us? That inflation is no longer a crisis, but it’s far from resolved. For now, the economy is growing, and the job market is holding up. But with high prices lingering and rate cuts off the table, the squeeze on household budgets isn’t going away.

Inflation may not be the loudest economic story this summer — but it’s still the one quietly draining wallets.