Consumer prices are rising more than expected

Consumer prices rose in March, boosted by both a strong economic recovery and year-on-year comparisons, at a time when the Covid-19 pandemic was about to suffocate the U.S. economy, the Department reported Tuesday. of Work.

The consumer price index increased by 0.6% over the previous month, but by 2.6% over the same period last year. The year-on-year gain is the highest since August 2018 and far exceeded the 1.7% recorded in February.

According to Dow Jones estimates, the index was projected to increase 0.5% monthly and 2.5% as of March 2020.

Gasoline prices contributed the most to the monthly rise, with a 9.1% rise in March and caused about half of the overall rise in the CPI. Gasoline has increased by 22.5% over a year ago, in part by a 13.2% increase in energy prices.

Food also increased, 0.1% more per month and 3.5% per year. The food category at home increased by 3.3%. The six government measures on grocery store indices increased, with the largest increase of 5.4% in the category of meat, poultry, fish and eggs.

Outside food rose 3.7%, while “limited-service meals,” which include pick-up, drop-off and delivery restaurants, jumped 6.5% during the year, the largest annual increase in the history of the 1997 survey.

Markets showed a modest reaction to the news, with futures stocks out of their lows during the morning, but still indicated a negative open. Yields on government bonds remained mostly flat.

This large year-on-year rise occurred due to what economists call the “base effect” or the lower level used for comparison. By March 2020, the government had just initiated a mass closure of U.S. companies that would ultimately see more than 22 million Americans sent to the unemployment line.

The core CPI, which excludes volatile food and energy costs, rose 0.3% month-on-month and 1.6% year-on-year.

Although inflation figures appear high, many economists as well as Federal Reserve policymakers expect the increase to be temporary. There will likely be a sharp increase in April as well, but the numbers are expected to decline as the worst months of the close fall outside of data comparisons.

Fed officials have said they will not adjust the policy based on short-term jumps in inflation readings. President Jerome Powell told CBS’s “60 Minutes” in an interview aired Sunday evening that he expects no interest rate hike this year.

Still, markets have had prices on higher growth and inflation, and government bond yields have risen to their highest levels since before the pandemic. Economic reopening along with unprecedented levels of public policy support are contributing to the inflationary environment.

Fed officials see growth of around 6.5% this year, which would be the fastest increase since 1984.

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