According to official data, US annual inflation decreased to 5% last month, marking the slowest rate of price rises since they first started to rise in 2021, Entrepreneurng Report.
The price of a basket of goods and services is measured monthly by the consumer price index (CPI), which indicated a slight reduction in the rate over the previous year in March. The annual inflation rate was 6.0% in February, a sharp fall from its peak of 9.1% in June.
Core inflation, which excludes volatile energy and food costs, has stayed stable, indicating that comparisons to the sky-high gas prices a year ago, at the start of Russia’s invasion of Ukraine, may be to blame for the slowing pace. Core inflation in March was 5.6% over the previous year, up from 5.5% in February.
With a 0.4% increase over the previous month and an 8.2% increase over the previous year, housing has been the main driver of price increases over the past few months. The increase in housing costs cancels out the negative effects that falling energy costs, which fell 6.4% over the last year, had on the inflation rate as a whole. March saw no changes in food prices from the previous month.
Despite the general cooling, Federal Reserve policymakers, who have been contemplating additional interest rate hikes in their relentless push to cut inflation, are unlikely to be persuaded by the widely watched inflation report.
Economists anticipate the Fed to keep raising interest rates despite the uncertainty higher rates might cause for the economy, even though the overall inflation rate is on the decline. In response to the failure of Silicon Valley Bank, the Federal Reserve raised interest rates in March by a quarter point, bringing them to a range of 4.75% to 5%. (SVB). The Fed has hiked interest rates nine consecutive times over the last year, hiking rates by a quarter point up to three-quarter points each time.
In March, the Fed chair, Jerome Powell, indicated that the central bank was closely monitoring the impact of SVB’s fall but was still intent on getting inflation down to a target objective of 2%.
“We’re observing what the banks are doing and wondering whether loan conditions will tighten at all. Then, we consider that to be effectively accomplishing the same goal as the rate increases. That effectively replaces rate increases, according to Powell. We’ll take the necessary steps to reduce inflation to 2% in the end. That is beyond question.”
Another crucial piece of information the Fed considers when deciding whether to raise interest rates, the jobs report from last month, together with the CPI data from March, indicated evidence of persistent core inflation.
While still an overall increase, the labor market added 236,000 positions in March, which indicates a minor cooling off of the market. At 3.5%, the unemployment rate decreased by 0.1%.
The numbers indicate that the job market is slowing down gradually, which the Fed will likely interpret as evidence that the economy can withstand further interest rate increases even as worries about a recession loom.
In conclusion, the Federal Reserve will announce any forthcoming interest rate increases during its upcoming board meeting on May 2 and May 3.
Source: The Guardian
