Inflation pressures in America continued to firm last month, according to new data from the Bureau of Labor Statistics (BLS). Specifically, the consumer price index (CPI) for all urban consumers fell by 0.1 percent in March, the largest decline in a year. However, most of the weakness was due to a sharp 2.8 percent drop in energy prices last month, and year-over-year growth actually lifted to 2.4 percent, the fastest pace of annual growth since February 2017.
Moreover, “core” CPI, which excludes the volatile food and energy components, increased by 0.2 percent in March, helped by above-trend gains in the prices of airfare, shelter (rent), and medical care. Today’s CPI report is supported by yesterday’s data on wholesale inflation, which together should help officials at the Federal Reserve, ceteris paribus, justify additional interest rate hikes in 2018. Current market pricing implies an 88.8 percent chance of the next rate increase occurring at the June Federal Open Market Committee (FOMC) meeting.
Sources: Econoday, U.S. DoL, Bloomberg, CME, FRBSLPost author: Charles Couch