Inflation Rose 3.5% in March, More Than Expected

The U.S. Bureau of Labor Statistics (BLS) reported that the consumer price index (CPI) rose 3.5% year over year in March, accelerating from 3.2% in February. The month’s gain exceeded the Dow Jones forecast of a 3.4% year-over-year level.

The “core” CPI, which strips out the unpredictable food and energy components, also rose 0.4% in March and 3.8% annually. Shelter and energy costs mainly drove the increase, with shelter accounting for about one-third of the CPI weighting.

Economists’ expectations for the Federal Reserve (Fed) to begin interest rate cuts hinge on a deceleration of shelter-related costs. Notably, food prices for meat, fish and poultry rose, with egg prices taking a 4.6% jump.

“Today’s report shows inflation has fallen more than 60% from its peak, but we have more to do to lower costs for hardworking families. Prices are still too high for housing and groceries, even as prices for key household items like milk and eggs are lower than a year ago.”

– President Joe Biden in a statement

The BLS’ March data revealed a resilient labor market. The U.S. economy added 303,000 jobs in March, far exceeding forecasts of 200,000 and marking the 39th straight month of job growth. The unemployment rate also dropped to 3.8%, as expected, from 3.9% in February. Furthermore, the real average hourly earnings remained flat in March and increased just 0.6% over the past year, which is less than ideal news for workers.

What’s Next?

Fed officials have signaled that rate cuts are likely at some point this year. However, as inflation increased once again in March, the Fed is likely to wait at least until the summer before starting to lower interest rates since the rate is still well above the 2% target. The latest reading now has many economists predicting that even a July cut may be a stretch.

High inflation continues to apply financial pressures on most U.S. households, with Americans paying more for necessities like rent and food. Individuals should continue to monitor the economy and associated inflation trends, adjusting their financial habits accordingly. Employees should check with their managers for financial and mental wellness benefits and related resources.

We will keep you updated with any notable changes.

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