The consumer price index in March increased by 0.4% from the previous month. Compared to 12 months ago, the composite index rose by 3.5%.
Economists had expected sales to rise 0.3% month-on-month and 3.4% over the 12 months.
Core inflation, which excludes food and energy, rose 0.4% in the month, in line with last month and above expectations of 0.3%. Compared to a year ago, core inflation rose 3.8%, which was also better than expected and in line with February’s numbers.
When the consumer price index spiked in January, many analysts said it was likely a seasonal anomaly and expected inflation to start falling again soon. After three months of higher-than-expected inflation, that’s no longer a valid interpretation. Over the past three months, core inflation rose at an annual rate of 4.6%. That’s the highest three-month annual rate of inflation for any period between August 1991 and 2020, said Harvard economist Jason Furman.
Consumer inflation reached a recent peak of 9.2% in June 2022, but the Biden administration is under pressure from lawmakers worried about the Federal Reserve raising interest rates at a record pace and unusually large budget deficits. It has since retreated as spending has been reined in. Disruptions in supply chains are a major cause of inflation in commodity prices.
The Federal Reserve said it was looking for data to give it more confidence that inflation has fallen to 2%. The rise in inflation in February casts doubt on the idea that the pace of price growth will continue to slow. The statistics raise the possibility that Fed officials will hold off on cutting interest rates until this summer or longer.
Before Wednesday’s data, markets had priced in about a 60% chance of a rate cut at the June Fed meeting.
Despite the expiration of the pandemic stimulus package and the Biden administration’s post-pandemic spending through the American Rescue Plan and the Control Inflation Act, the federal government continues to run very large budget deficits.This highly expansionary fiscal policy is likely to significantly reduce the effectiveness of interest rate increases and keep inflation high.
