The Economy

U.S. Consumer Prices Jump 0.4% in March

“The uptick in inflation, being largely driven by higher gas prices, is unlikely to worry investors or the Federal Reserve."
Matthew HellerApril 10, 2019

U.S. consumer prices increased by the most in 14 months in March but the core measure slipped to its lowest level in a year, indicating inflation pressures remain muted.

The Labor Department reported Wednesday that the Consumer Price Index rose 0.4%, boosted by increases in the costs of food, gasoline and rents. It was the biggest advance since January 2018 and followed a 0.2% gain in February.

In the 12 months through March, the CPI increased 1.9% after a 1.5% gain in February, which was the smallest since September 2016.

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Economists polled by Reuters had forecast the CPI climbing 0.3% in March and accelerating 1.8% year-on-year.

According to MarketWatch, “The uptick in inflation, being largely driven by higher gas prices, is unlikely to worry investors or the Federal Reserve. Inflation has tapered off after a sharp runup a year ago, and with the U.S. and global economies growing more slowly, there’s little likelihood of an outbreak in inflation anytime soon.”

In the 12 months through March, the core CPI excluding the volatile food and energy components increased 2.0%, the smallest advance since February 2018. The Fed’s preferred inflation measure, the core personal consumption expenditures (PCE) price index, increased 1.8% on a year-on-year basis in January, below the Fed’s 2% target.

“The [March] report will only encourage the Fed to stay parked on the sidelines, awaiting clearer direction on inflation and the economy,” Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, told Reuters.

In a statement accompanying last month’s interest rate decision, the central bank described inflation as having “declined” on an annual basis “as a result of lower energy prices.”

A 3.5% jump in energy prices accounted for about 60% of the increase in the CPI last month. Gasoline prices surged 6.5%, the biggest gain since September 2017, after rising 1.5% in February.

Food prices gained 0.3% after accelerating 0.4% in February while healthcare costs rebounded 0.3% after slipping 0.2% in February.

Core CPI was held down by a 1.9% plunge in apparel prices, the largest drop since January 1949.