Rising gas prices and soaring mortgages and rent contributed to inflation exceeding expectations in March, exacerbating Americans’ ongoing struggle with high expenses. This development may compel the Federal Reserve to maintain its elevated interest rates for an extended period.
According to the latest data from the Bureau of Labor Statistics released on Wednesday, US consumer prices surged by 3.5% over the 12 months ending in March, surpassing February’s 3.2% rate and marking the highest annual increase in the past six months. This report underscores the persistent challenges in lowering inflation and suggests that any relaxation of monetary policy may be delayed.
President Joe Biden acknowledged the need for further action to combat inflation, stating, “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.”
Greg McBride, chief financial analyst for Bankrate, suggested that the prospect of an interest rate cut in June is now unlikely, as reflected in the market’s reduced probability of such a move.
US stocks experienced a significant decline following the release of the inflation data, with the Dow dropping by over 500 points. The S&P 500 and Nasdaq Composite also experienced losses.
While gas and shelter costs were primary contributors to the monthly increase in prices, broad-based price hikes were observed across various categories. Economists had anticipated a lower monthly increase and a slightly lower annual rate.
Core inflation, which excludes volatile categories like food and energy, remained stubbornly high, indicating persistent underlying inflation trends. Car insurance premiums and medical care services also experienced notable increases.
Despite some positive indicators, such as stabilization in grocery prices and a slowdown in restaurant price growth, consumers continue to face challenges due to rising prices for services and fuel. Economists anticipate a gradual moderation in the rate of price increases but acknowledge that consumers may feel the impact of the current price environment for some time.
