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 set to slow the US economy, the Department of Labor reported Tuesday.
The consumer price index rose by 0.6% compared to the previous month, but by 2.6% compared to the same period of the previous year. The year-on-year increase is the highest since August 2018 and was well above the 1.7% recorded in February.
According to estimates by Dow Jones, the index is expected to rise by 0.5% per month and by 2.5% from March 2020.
Gasoline prices were the largest contributor to monthly earnings, up 9.1% in March, accounting for about half of the total rise in CPI. Food was also up 0.1%.
Markets reacted modestly to the news, with stock futures falling from their lows for the morning but still pointing to a negative open. Government bond yields were largely unchanged.
This large year-on-year increase was due to what economists refer to as the “base effect” or lower comparative levels. In March 2020, the government had just begun a massive shutdown of US businesses that would ultimately send more than 22 million Americans to the unemployment line.
The core CPI, which excludes volatile food and energy costs, rose 0.3% monthly and 1.6% year over year.
While inflation numbers are high, many Federal Reserve economists and policymakers expect the spike to be temporary. April is likely to rise sharply as well, but then the numbers are likely to fall as the worst months of the shutdown fall out of the data comparisons.
Fed officials have said they will not adjust policy based on short-term jumps in inflation levels. Chairman Jerome Powell told CBS ‘”60 Minutes” in an interview broadcast on Sunday night that he did not expect any rate hikes this year.
Still, markets have priced in higher growth and inflation, with government bond yields rising to their highest level since the pandemic. The economic reopening coupled with unprecedented public order support is contributing to the inflationary environment.
Fed officials see growth of around 6.5% this year, which would be the fastest increase since 1984.
This is the latest news. Please try again here.
Did you like this article?
For exclusive stock selection, investment ideas and CNBC Global Livestream
Sign up for CNBC Pro
Start your free trial now