The Fed’s recommended inflation measure showed prices rose sharply again in March, confirming that progress in bringing inflation down to the Fed’s 2% target has stalled.
The personal consumption expenditure price index for March rose 0.3%, the Commerce Department released Friday. Compared to a year ago, the index is up 2.7%, slightly ahead of Wall Street expectations of 2.6%.
Core PCE inflation, which deducts food and energy prices, also rose 0.3% from February to March. Over the past 12 months, the core PCE index rose 2.8%, beating expectations of 2.7%.
The Commerce Department’s Bureau of Economic Analysis’s release includes March numbers as well as upward revisions to its January and February forecasts. January’s figure was revised up to 0.423% from the originally announced 0.377%. In February’s revised figures, the inflation rate increased from 0.333% to 0.338%.
The core figure for January was revised upward from 0.452% to 0.502%, and the core figure for February was revised upward slightly from 0.261% to 0.266%.
Fed officials said they are paying close attention to the multi-month moving average of inflation, believing it indicates an underlying trend in inflation. Inflation for the three months to March was an annualized rate of 4.4%, up sharply from 3.4% in unrevised data for the three months to February. It remained flat at 2.5% for the six-month period.
The three-month annualized core inflation rate also rose to 4.4% from 3.5% in unrevised data through February.
Some complain that rents and homeownership equivalents are artificially pushing up inflation, but measures of service inflation that exclude energy and housing also show sharp increases in prices. Core services excluding shelters (3-month annualized rate) increased by 5.5%, up from 4.5% a month ago.
Several Fed officials have noted the importance of monitoring this “supercore” inflation measure.
Inflation has accelerated in recent months, causing markets to reconsider expectations that the Fed will cut interest rates several times this year. Current bond and swap prices indicate the Fed is likely to cut interest rates only once this year, and probably not until the fourth quarter.
