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 is not just a headline, rather, it is 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 the pace is not accelerating. Prices in April were up 3.4% year-over-year, slightly higher than economists expected. That creates challenges 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 roughly 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 balance cooling inflation with avoiding a recession. But April’s report suggests that 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%, making borrowing expensive across the board and putting additional pressure on the housing market.

There is also a psychological shift underway. Recent surveys show more Americans 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 is a feedback loop the Fed is watching closely and one that could shape interest rate policy well into 2026.

So what does the April data really tell us? Inflation is no longer a crisis, but it is far from resolved. For now, the economy is still growing and the job market remains strong. Yet with high prices lingering and rate cuts off the table, the squeeze on household budgets is unlikely to ease anytime soon.

Inflation may not be the loudest economic story this summer, but it is the one quietly draining wallets.