Inflation hit a new 40-year high in March as US consumer prices rose 8.5% from a year ago, the Labor Department said on Tuesday.
The consumer price index, which tracks a basket of goods and services, rose 1.2% in March after rising 0.8% in February, showing that inflation accelerated last month. Underlying inflation, which eliminates volatile food and energy costs, rose 6.5% from a year ago.
Nearly half of the latest rise in inflation comes from rising gas costs, which rose 18% in March to an average of $ 4.33 a gallon. Food and accommodation costs also rose, with air fares, health and car insurance and furniture contributing to the increase.
More positively for consumers, the prices of used cars and trucks, one of the main drivers of inflation last year, fell by 3.8% in March.
"Economic resilience will be tested"
While prices continue to rise, some economists believe that inflation may have peaked and is likely to decline for the rest of the year.
"[T]Monthly increases in clothing, recreation and out-of-home meals were lower than in recent months, which may suggest that the upward pressure on services sector wages is over, "said Ian Shepherdson, chief economist. of Pantheon Macroeconomics, in a research.
Another weakness is that underlying inflation, although at its highest level since 1982, was not as bad as economists expected, tempered by falling prices for some goods, and in particular for cars. used.
While it is possible to ask households to overlook the price increase at the gas station and grocery store, the Federal Reserve pays more attention to underlying inflation as it sets policy, because it is less volatile. Underlying month-on-month inflation has moderated to its slowest level since September.
"I hope this is as bad as it gets," Brian Jacobsen, a senior investment strategist at Allspring Global Investments, told the Associated Press. "The risk is that a hot labor market will cool under the force of these higher costs of food, fuel and finance. This is a time when economic resilience will be tested."
The report comes as the Biden administration announces a push to cut gas prices by giving up environmental requirements to gasoline sold in the summer and releasing oil reserves.
Cost increases are the most pressing issue for many Americans, a CBS News poll this week meeting. Two-thirds of respondents said raising prices is a challenge for their families, with about the same number reporting reduced travel, entertainment or driving. Cost increases have exceeded wages for 11 months, eroding the real incomes of workers.
Russia's war in Ukraine and the consequent sanctions by Western nations add another level of uncertainty. The conflict is ruining the world's fossil fuel, food and precious metal suppliers.
"The war in Ukraine and economic sanctions on Russia have jeopardized global energy supply," Brian Coulton, chief economist at Fitch Ratings, said in a statement. "The jump in oil and gas prices will increase industry costs and reduce real consumer incomes. Total shortages and energy rationing are possible in Europe if there is an abrupt halt in Russian supply. 'higher energy is a fact'.
The Fed is raising rates
Rising inflation has become a major concern for the U.S. central bank, and policymakers say they will act decisively to curb rising costs by raising rates.
The Federal Reserve is expected to raise its key interest rate by half a percentage point in each of the next two meetings, which it has not done in two decades.
Higher interest rates slow down the economy by making loans more expensive and, hopefully, reduce high inflation. The concern is that the Federal Reserve may be so aggressive with its rises that it is forcing the economy into a recession.
Higher interest rates also put downward pressure on all types of investments, which are seen as the most affected. This is because when investors earn more interest on relatively safe bonds, they are less willing to pay higher prices for riskier stocks. Technology and other high-growth stocks that have been some of the most important recent stock market winners have been especially in the spotlight.
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