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Consumer prices rose 3.5% in the 12 months to March, faster than economists expected.
CNN
—
Inflation rose more than expected in March due to soaring gas prices and soaring mortgage and rent costs, adding to Americans’ long-standing struggle with high costs. That could force the Fed to continue raising penal interest rates for a longer period of time.
U.S. consumer prices rose again last month, rising 3.5% in the 12 months through March, according to the latest Consumer Price Index data released Wednesday by the U.S. Bureau of Labor Statistics.
This was a sharp increase from February’s 3.2% and the highest annual rise in six months. Friday’s report further notes that the path to lower inflation remains extremely steep, continues to drag on Americans’ hard-earned finances, and monetary policy easing may not happen soon. is emphasized.
President Joe Biden acknowledged Wednesday that there is “more work to do” to rein in inflation.
“Today’s report shows that inflation has fallen by more than 60% from its peak, but we still have more work to do to lower costs for hardworking families. “Even though household goods prices are lower than they were a year ago, housing and food prices remain too high,” Biden said in a statement.
Inflation has been a thorn in Biden’s presidency, with voters consistently giving him poor ratings for his handling of the economy.
“We can kiss goodbye with the June rate cut,” Greg McBride, chief financial analyst at Bankrate, said in a commentary published Wednesday. After the report’s release, the market’s probability of a June rate cut fell to 21%, down from 53% on Tuesday and 73% last month, according to the CME FedWatch tool.
U.S. stocks tumbled Wednesday after the release of hotter-than-expected inflation data, with the blue-chip Dow Jones Industrial Average dropping more than 500 points. The S&P 500 fell 1%, and the Nasdaq Composite also fell 1%.
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On a monthly basis, the index was flat from February’s 0.4% rise.
Gasoline and shelter costs accounted for more than half of the monthly increase, but the price increases were widespread, the BLS said. Last month, prices rose in nearly every major category, with the exception of a few categories where prices fell or stayed the same (grocery store groceries), including used cars, new cars, and fuel oil.
Economists had expected a 0.3% month-on-month increase and a 3.4% annualized increase, according to FactSet consensus estimates.
The Fed wants to see meaningful progress on inflation before it starts cutting rates.
The pace of price growth slowed markedly in 2023, but that progress not only hit a roadblock starting this year, but also reversed.
Because aggregate indexes can be heavily influenced by volatile categories such as food and energy, central bankers often focus on a “core” index that excludes these categories.
However, core CPI did not decline as much as expected.
Excluding gasoline and food prices, which are more volatile categories, core inflation rose 0.4% month-on-month, bringing the annualized rate to 3.8%, the same as February’s reading. Economists had expected prices to rise 0.3% from a month ago and inch back to 3.7% for the year, according to FactSet.
“We expected the headline numbers to go up because of energy prices, but the fact that core temperatures were higher than expected was really disappointing,” said Tyler Schipper, assistant professor of economics and data analysis at the University of St. Thomas in Minnesota. ” he said. he told CNN. “This is a remarkable number when you think about the underlying inflation trend, and it’s a very persistent, very stubborn number.”
Sarah House, managing director and senior economist at Wells Fargo, told CNN that on a three-month annualized basis, core inflation is running at 4.5%.
“We still have very stubborn services inflation,” he said. “This is a factor that the Fed is really focused on. They feel like they have a better grasp of commodity prices and what’s going to happen, but they need the services they need to keep inflation significantly lower this year.” We are yet to see any improvement in the sector.”
The housing component of inflation has proven frustrating to economists and other observers. That’s because private sources of more recent data show that rents have cooled over the past year, even though the government’s assessment of shelter costs (with a lag) remains high.
On a yearly basis, the CPI shelter index was unchanged in March from 5.7% a month earlier.
“Shelter inflation has firmed up a little bit, but I think that raises some questions about how quickly and to what extent shelter inflation will continue to cool down,” House said.
Shelters are not the only ones left mired in service inflation. The report said services excluding shelter index continued to outpace overall inflation, rising 0.5% for the month and 5.3% for the year.
Prices for medical services fell slightly in February, but rose by 0.6% last month. And auto insurance soared 2.6%, bringing the annual price increase to an unpleasant 22.2%.
This story is in development and will be updated.
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