US consumer prices surge on gasoline
Print Edition
US monthly consumer prices increased by the most in 16-1/2 years in March as the Ukraine conflict boosted the cost of gasoline to record highs, cementing the case for a 50 basis points interest rate hike from the Federal Reserve next month.
The acceleration in prices reported by the United States Labor Department on Tuesday culminated in annual inflation rising at its fastest pace since the end of 1981. But there is cautious hope that the worst of the post-pandemic inflation surge is over.
Monthly underlying inflation pressures moderated as goods prices, excluding food and energy, dropped by the most in two years. Further declines in the so-called core goods prices are likely as demand shifts back to services amid the rolling back of COVID-19 restrictions on businesses.
“The Fed will take a tiny bit of comfort from today’s report, but it still has much work to do to restore price stability,” said Sal Guatieri of BMO Capital Markets in Toronto.
The consumer price index jumped 1.2 percent last month, the biggest monthly gain since September 2005. The CPI advanced 0.8 percent in February. An 18.3 percent surge in gasoline prices, the largest since June 2009, accounted for more than half the increase in the CPI.
Gasoline prices at the pump on average soared to an all-time high of US$4.33 per gallon in March, according to AAA. Inflation was already a headache before Moscow’s military operation in Ukraine, which unleashed a barrage of sanctions, including the banning of Russian oil imports by the US.
Americans are not the only ones reeling from high inflation, which was initially fueled by huge amounts of money doled out by governments across the globe to cushion against the devastating impact of the novel coronavirus pandemic.
The Russia-Ukraine war, now in its second month, has led to a global surge in food prices as the two nations also are major exporters of commodities like wheat and sunflower oil.
Inflation increased broadly last month, with food prices rising 1.0 percent. The cost of food consumed at home climbed 1.5 percent as all grocery categories posted big gains. Groceries increased 10 percent on a year-on-year basis, the most in 41 years. But the cost of dining out grew less, with prices of food consumed away from home rising 0.3 percent, the smallest gain in a year.
In the 12 months through March, the CPI accelerated 8.5 percent, the largest year-on-year gain since December 1981, after a 7.9 percent jump in February. It was the sixth straight month of annual CPI readings north of 6 percent. Last month’s increase in inflation was in line with expectations.
The strong CPI readings followed on the heels of news last month that the unemployment rate fell to a new two-year low of 3.6 percent in March.
The US central bank in March raised its policy interest rate by 25 basis points, the first hike in more than three years. Minutes of the policy meeting published last Wednesday appeared to set the stage for big rate increases down the road. The Fed is expected to soon begin trimming its asset portfolio. High inflation and the Fed’s hawkish posture have left the bond market fearing a US recession, though most economists expect the expansion will continue.
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