Consumer prices rose in March, driven by both a strong economic recovery and year-on-year comparisons at a time when the Covid-19 pandemic was about to stifle the US economy, he said. Tuesday Department of Labor.
The consumer price index increased by 0.6% compared to the previous month, but by 2.6% compared to the same period a year ago. The year-on-year gain is the highest since August 2018 and was well over 1.7% recorded in February.
The index is expected to increase by 0.5% monthly and by 2.5% from March 2020, according to Dow Jones estimates.
Gasoline prices contributed the most to the monthly increase, rising by 9.1% in March and being responsible for about half of the total CPI increase. Gasoline increased by 22.5% compared to a year ago, part of the 13.2% increase in energy prices. Food also decreased, by 0.1% per month and 3.5% per year.
Markets showed a modest reaction to the news, with futures on low stocks this morning, but still indicating a negative opening. Government bond yields remained largely fixed.
That big year-over-year increase came because of what economists call the “base effect” or the lower tier used for comparison. By March 2020, the government had just begun a massive shutdown of US business that would eventually see more than 22 million Americans sent into unemployment.
The core CPI, which excludes volatile food and energy costs, increased by 0.3% per month and by 1.6% year-on-year.
While inflation figures appear high, many economists as well as policymakers in the Federal Reserve expect the rise to be temporary. April is likely to show a sharp rise as well, but then the numbers should drop as the worst months of the closing fall from data comparisons.
Fed officials have said they will not adjust the policy based on short-term jumps in inflation. President Jerome Powell told CBS 60 Minutes in an interview on Sunday night that he does not expect interest rate hikes this year.
However, markets have set higher prices and higher inflation, and government bond yields have risen to their highest levels since before the pandemic. Economic reopening, together with unprecedented levels of support for public policy, contributes to the inflationary environment.
Fed officials see an increase of about 6.5% this year, which would be the fastest growth since 1984.
This is breaking news. Please come back here for updates.
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