The Consumer Price Index (CPI) experienced an increase of 0.4% this month, mirroring the rise seen in February but exceeding the anticipated 0.3% forecast. Consequently, this has elevated the annual inflation rate to 3.5%, compared to 3.2% in February, and slightly above the projected 3.4%.Upon examining the core components of the CPI, which exclude the volatile food and energy sectors, we observed a 0.4% increase, surpassing the expected 0.3%. This has resulted in an annual rate of 3.8%. The primary drivers of this month’s inflationary pressures were identified in the shelter and gasoline indices, which collectively accounted for over half of the monthly increase in the all-items index.
The energy sector experienced a notable revival, registering a 1.1% increase for the month, which corresponds to a 2.1% increase on an annual basis. Particularly, gasoline prices witnessed a monthly increase of 1.7%, culminating in a 1.3% annual growth. Concurrently, the food sector saw a modest uptick of 0.1% in March, amounting to an annual increase of 2.2%. It is significant to highlight that the cost of dining out surged by 0.3% on a monthly basis, resulting in a 4.2% annual escalation, while the prices for groceries remained unchanged. Moreover, shelter expenses sustained their ascending trend, making a substantial contribution to the monthly inflation surge with a 0.4% increase in March, equating to an annual rise of 5.7%.
The inflation rate has shown a notable acceleration since the beginning of the year, with persistent challenges in mitigating housing and shelter costs, further exacerbated by the recent pressures from the energy sector due to geopolitical tensions in the Middle East. In light of the March policy meeting, the Federal Reserve, along with several of its officials, emphasized the ongoing need to address inflation concerns. As such, it is anticipated that we will persist in a higher interest rate environment for an extended period before considering any potential reductions. Presently, the market consensus for the June policy meeting has significantly shifted, with a 79% expectation for maintaining the current rate, diverging from previous anticipations of an initial rate reduction.
Change (%) in the last twelve months in CPI and Core CPI
Source: U.S. Bureau of Labor Statistics
Monthly change (%) in CPI
Source: U.S. Bureau of Labor Statistics