An easing in core inflation pressures took the edge off the fastest headline reading since 1981 as headline CPI surged to 8.5% in March.
U.S. inflation accelerated to the fastest pace in four decades again last month, data from the Bureau of Labor Statistics indicated Wednesday, but a slight retreat in core consumer prices suggests pressures may be easing heading into the summer months.
The headline consumer price index for the month of March was estimated to have risen 8.5% from last year, up from the 7.9% pace in February and the fastest rate since December of 1981. On a monthly basis, inflation was up 1.2%, the BLS said, with both tallies topping Wall Street forecasts.
So-called core inflation, which strips-out volatile components such as food and energy prices, rose 0.3% on the month, and 6.5% on the year, the highest since February of 1991, the report noted, with the annual reading coming in ahead of the Street consensus forecast.
White House Press Secretary Jen Psaki warned Americans late Monday to expect an “extraordinarily elevated” level of inflation from last month’s reading, thanks in part to the impact on food and energy prices from Russia’s war on Ukraine.
U.S. crude futures hit a ten-year high of $123.70 per barrel last month in the immediate wake of Moscow’s invasion and the threat of sanctions on energy exports, while wheat and other food prices leaped on reports of damaged crops and grain embargoes linked to the conflict.
“We expect a large difference between core and headline inflation … reflecting the global disruptions in energy and food markets,” Psaki told reporters in Washington.
Stock Market Today – 4/12: Stocks Edge Higher As Inflation Data Looms; Treasury Yields, Dollar Climb
U.S. stocks briefly extended their modest advance following the data release, with futures tied to the Dow Jones Industrial Average indicating a 155 point opening bell gain and those tied to the S&P 500 priced for a 25 point advance.
Benchmark 10-year U.S. Treasury bond yields eased to 2.712% while the US dollar index, which tracks the greenback against a basket of six global currencies, fell from a fresh two-year high to 100.16.
The CME Group’s FedWatch tool is showing an 87.7% chance of a 50 basis point rate hike in March, but less than a 54.3% chance of follow-on move of the same size in June.
The Atlanta Federal Reserve’s GDPNow forecasting tool, a real-time benchmark, suggests U.S. economic growth has now slowed to a 1.1% clip, down from the 7% growth rate recorded over the three months ending in December.
Pantheon Macroeconomics analyst Ian Shepherdson, however, thinks the March reading could mark the peak of this cycle’s inflation surge, noting that so-called ‘base effects’ — in other words the measurement levels for various components in the inflation basket — will likely pulling headline readings to 6% by the summer and 3% by the start of next year.
“We are becoming increasingly confident
that the surge in core goods prices, both vehicles and
other goods, is coming to an end, and is more likely to
be followed by absolute declines than a mere levelling-
off,” he said.
The swing from tight supply to a goods glut
could be rapid and dramatic, essentially because the
lagged response from the supply chain to the Covid-
driven surge in demand is coming on-stream just as consumers want fewer goods,” he added.
