Inflation worsens in March as gas and rental costs rise: Live Update

+ 6.5%


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Percentage changes in the consumer price index year after year

Inflation in the United States hit 8.5 percent last month, the fastest pace in 12 months since 1981, as rising petrol prices linked to Russia’s aggression in Ukraine led to strong demand and stiff epidemic-related supply shortages. .

Fuel prices have risen to record levels across most parts of the country, and grocery prices have risen, the Department of Labor said in a monthly report on the Consumer Price Index on Tuesday. Price pressures have been painful for American families, especially those with low incomes and a large portion of their budgets devoted to needs.

But the news was not uniformly bad: a measure that pulls out volatile food and fuel prices, falling slightly from February as used car prices rise. Economists and policymakers have taken it as a sign that commodity inflation could begin to cool after climbing at an alarming rate for most of last year.

Indeed, several economists say March could be a high-water mark for overall inflation. The rise in prices is likely to start in the coming months as petrol prices have eased somewhat – the national average for a gallon on Tuesday was $ 4.10, down from a $ 4.33 peak in March, according to AAA. Some researchers also expect consumers to stop buying so many products, furniture or outdoor equipment, that could start to put pressure on the extra-taxed supply chain.

“These numbers will probably represent some of the top ones,” said Gregory Daco, chief economist at YY-Parthenon, Ernst & Young’s strategy consultant. However, he said it was important to see whether food and fuel prices would rise in the coming months, excluding so-called core prices.

A layup would be welcome news for the White House, as inflation has become a major responsibility for Democrats during the midterm elections in November. Public confidence in the economy has plummeted and rapid inflation could erode the support of President Biden and his party as well as undermine their control of Congress.

While global inflation has risen as economies adapt to epidemics and supply-chain problems are shared, core prices in the United States have risen more sharply than in places like Europe and Japan.

This has given Republicans a point of no return, especially since prices have outpaced recent wage increases. According to the Department of Labor, average hourly earnings rose 5.6 percent in March. But adjusted for inflation, the average wage fell 2.7 percent.

“The value of Americans’ salary checks is lower every month,” said Senator Patrick J. Tommy, a Republican from Pennsylvania, Wrote on Twitter After the report.

Although the Federal Reserve has primary responsibility for controlling inflation, the administration has taken steps to combat inflation. Mr Biden announced on Tuesday that a ban on the sale of summer high-ethanol gasoline blends would be suspended this year, with White House officials saying the goal was to reduce gas prices.

The move follows a presidential decision last month to release one million barrels of oil over the next six months from the US Strategic Petroleum Reserve.

Referring to Russian President Vladimir Putin, Mr. Biden said in Iowa on Tuesday afternoon: Inflation rose sharply before the war in Ukraine, although the conflict has added to the pressure on energy and commodity prices.

There are some promising signs that inflation may ease in the coming months.

The first is basically mechanical. Prices began to pop up last spring, meaning changes will be measured in subsequent months compared to numbers a year earlier.

More fundamentally, the March data showed that prices of some products, including used cars and clothing, have moderated or even dropped – although the signal was somewhat inconsistent, furniture prices have risen sharply. If inflation falls sharply in commodity prices, it can help reduce overall inflation.

In an online presence hosted by The Wall Street Journal, Lel Brennard, the Fed governor and Mr Biden’s nominee for central bank’s next vice-chairman, said: “We welcome the moderation in this section. “I want to see if we can see restraint in the months ahead.”

Amid a slump in gasoline prices this month and a possible easing of commodity prices, even economists who have long expressed concern about inflation say it could start to ease.

“It’s good-gravity that we’re not going to see a figure above 8.5 percent this year,” said Jason Farman, a Harvard economist who served as chair of President Barack Obama’s Economic Advisory Council.

But even if inflation slows somewhat, it will likely spend 2022 well above the Fed’s target, which it defines as an average of 2 percent using a related but more delayed price index.

The key question is how much and how quickly prices will fall, and recent developments have increased the risks that uncomfortably fast inflation could prolong.

Pipe utility gas service

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Motor vehicle maintenance

Rent equivalent to owners

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Pipe utility gas service

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Cereals and bakery products

Tobacco and smoking products

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Equivalent rent to accommodation owners

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Service costs, including rent and other housing costs, are rising faster. These measures move slowly, and can be a major factor in determining the direction of inflation.

Wages are rising rapidly, pushing up costs for employers and potentially forcing them to raise prices. Businesses may feel that they have the ability to pass on rising costs to customers and even expand their profits, as customers continue to spend for a whole year of rapid price increases.

And cheap products are not guaranteed. A coronavirus outbreak is shutting down cities and disrupting production in China, adding a huge dose of uncertainty about Ukraine’s war commodity prices and supply chains.

“The impact of the price shock of this product is that they may take some time to make it through the economy,” said Tim Mahedi, a senior economist at tax and advisory firm KPMG US.

After a long stretch of rapid inflation, the US Federal Reserve is reacting without waiting to see what happens next. Fed officials began raising interest rates last month, indicating that they will continue to push “faster” as they try to curb debt, spending and demand in the hope of preventing steep inflation from becoming a more permanent feature of the US economy. .

“It’s a push: we’ve been in a decade where we haven’t had inflation reach 2 percent,” said Fed Governor Christopher J. Waller said during an event on Monday “We hope it goes away relatively quickly. It’s our job, and we’re going to get it done.”

Policymakers are expected to raise half-point interest rates at their meeting in early May, and have indicated that they will soon begin to shrink their bond holdings, a change that will strengthen higher rates and soften demand. Mrs Brennard suggested on Tuesday that such a plan could be announced in May and effective in June.

Although she predicted that consumer demand would decline in the coming months as the government provided less financial assistance to households than in 2021 and increased borrowing costs, Mrs Brennard cited the Ukraine war and Chinese lockdowns as risks that could cut supplies and keep inflation in check. Lifted.

According to a recent Bloomberg survey by economists, the median inflation forecast for the last three months of this year was 5.4 percent higher than the previous year – higher than the Fed’s target. Businesses and consumers regularly say that rapid inflation is disrupting their economic life, and many are worried that it will not evaporate quickly.

“Even if the economy slows down, it doesn’t seem to be slowing down for manufacturers, building product companies, trucking company people,” said Chrissy Wick, chief sales officer for the trucking company Western Express. A Fed-hosted panel on Monday.

He noted that truck drivers typically buy trucks when shipping demand is as hot as it is now, tempted by the promise of higher wages – but because of the shortage of trucks, that extra capacity could be years away.

“That supply chain and supply-demand ratio will not be right,” he said.

Ben Castleman And Anna Swanson Contributing Reporting.

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