Annual inflation ticks higher to 3.5 percent in March

Inflation rose further in March, according to new Labor Department figures released Wednesday.

The Consumer Price Index (CPI), a commonly used measure of inflation, rose 0.4% last month, or 3.5% annually, roughly in line with economists’ expectations. Economists had expected inflation to rise 0.4% in March, or 3.4% annually.

The latest figures come after two months of better-than-expected inflation data. Consumer prices rose 3.2% in February compared to the same month last year, and rose 3.1% in January.

Inflation has eased significantly since reaching a 40-year high of 9.1% in June 2022, but the Federal Reserve has been hesitant to declare victory or start cutting rates.

The central bank has raised interest rates to the highest levels in 20 years over the past two years in a bid to cool the economy and curb inflation.

But the U.S. economy continued to disappoint, adding 303,000 jobs in March and keeping the unemployment rate below 4%.

“Recent data on job growth and inflation are better than expected,” Fed Chairman Jerome Powell said last week ahead of the March jobs report.

“The economy added an average of 265,000 jobs per month over three years. [months] Through February, the pace is faster than since June last year,” he added. “And the high inflation data in January and February exceeded the low values ​​in the second half of last year.”

Chairman Powell cautioned that it was “too early to tell whether the recent readings represent anything more than just an increase.”

After the central bank chose to keep interest rates on hold last month, the Fed chair said the slight increase in inflation meant that “the overall picture of inflation creeping down a sometimes bumpy path towards 2% is actually “It hasn’t changed,” he emphasized. ”

How quickly inflation falls toward the Fed’s goal could have serious implications for the expected rematch between President Biden and former President Trump in November.

Biden and Democrats are aiming to turn around public opinion on the economy as the president continues to lag behind Trump in opinion polls. Mr. Trump holds a narrow 1 percentage point lead over Mr. Biden, according to a composite average from The Hill and Decision Desk Headquarters, and holds an even larger lead over Mr. Biden in economic approval ratings.

The economy has shown remarkable resilience under Biden, but stubborn inflation and major changes brought about by the pandemic have undermined voter support for his record.

More than half of the rise in inflation in March was due to gasoline and shelter prices, which have a big impact on consumer sentiment.

Home prices have soared since 2020, when a combination of pandemic stimulus, low interest rates and COVID-19 restrictions accelerated a surge in home purchases and a decline in home construction. Shelter prices have increased by 5.7% over the past 12 months.

But food prices, which have been rising steadily for years, appear to be leveling off. Overall food prices rose 0.1% in March after being flat in February. Grocery prices were flat for two months and rose just 1.2% over the past year, although groceries purchased outside the home were 0.3% more expensive.

Updated at 9:03am