Inflation rose just 0.1% in March from 5% a year earlier as the Fed hiked rates


Inflation cools down in March, Federal Reserve’s interest rate hike shows more impact Labor Department gave this information on Wednesday,

The consumer price index, a widely followed measure of the cost of goods and services in the US economy, rose 0.1% for the month compared with Dow Jones’ estimate of 0.2%, and 5% from a year earlier estimate of 5.1%. .

Core CPI, excluding food and energy, increased 0.4% and 5.6% on an annual basis, both in line with expectations.

The data showed that while inflation is still well above where the Fed feels comfortable, it is at least showing continued signs of decline. Policymakers target inflation around 2% as a healthy and sustainable growth level. The headline annual increase for CPI was the lowest since June 2021.

A 3.5% decline in energy costs and an unchanged food index helped keep headline inflation under control. Eating at home fell 0.3%, the first decline since September 2020, though it’s still up 8.4% from a year earlier. Egg prices, which had been rising, fell 10.9% for the month, a 12-month increase of 36%.

The 0.6% increase in shelter costs was the lowest increase since November, but still increased prices by 8.2% on an annual basis. Shelter makes up about one-third of the weighting in the CPI and is being closely watched by Fed officials.

Stock futures rose sharply following the report, while Treasury yields fell. Markets were still pricing in a 65% chance of a final 0.25 percentage point interest rate hike at the Fed’s May meeting, according to CME Group, although it was slightly lower than Tuesday.

Excluding shelters, the CPI rose 3.4% from a year ago, according to Jeffrey Roach, chief US economist at LPL Financial.

“As the economy slows, consumer prices should fall further and bring inflation closer to the Fed’s long-term target of 2%,” Roach said. “Markets will respond favorably to this report as investors become more confident that the next Fed meeting could be the last meeting the committee raises the Fed funds target rate.”

Used vehicle prices, a major contributor to early inflation growth in 2021, declined 0.9% in March and are now down 11.2% year over year. The cost of medical care services also fell 0.5% for the month.

in the past year, The Fed raised its benchmark interest rate nine times for a total of 4.75 percentage points, the fastest pace of tightening since the early 1980s. Officials initially dismissed inflation as transitory, expecting it to fall covid pandemic-related factors abated, but were forced to play catch-up as price increases proved more sustainable.

One key area the central bank has targeted is the labor market. The labor shortage had helped push up wages and prices, a situation that has eased somewhat in recent months.

in March, Non-farm payrolls increased by 236,000The smallest gain since December 2020, and average hourly earnings rose at a 4.2% annual pace, the lowest level since June 2021.

The Fed is hoping that it can calibrate policy so that the slowdown the labor market is trying to slow down doesn’t send the economy into recession. GDP growth is tracking at a 2.2% annual pace for the first quarter, according to data from the Atlanta Fed, although many economists expect a contraction later in the year.