Inflation rises to four-decade high, according to Fed’s preferred action 2022-04-29 09:01:00

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Inflation accelerated in March to its fastest pace since 1982, as measured by the Fed’s preferred metric, such as Ukraine war It led to higher energy prices and supply problems and continued strong consumer demand in the United States.

Consumer prices rose 6.6% in March from a year earlier, up from a revised 6.3% increase in February, according to the Commerce Department’s Personal Consumption Expenditure Price Index, which was announced Friday. The March rally was the fastest since January 1982.

The so-called core personal consumption expenditures index — which strips out volatile food and energy prices — rose 5.2% in March from a year earlier, down from the revised 5.3% in the year to February.

On a monthly basis, core prices rose by a seasonally adjusted 0.3% in March from the previous month, the same as the 0.3% adjusted increase in February. That was down from the 0.5% monthly average in each of the previous four months – a moderate slowdown that suggests broad price pressures may start to subside.

Federal Reserve Chairman Jerome Powell said at his press conference on March 16 that central bank officials are watching closely every month. changes in inflation Looking for signs of whether price pressures have eased lately. The central bank, which is aiming for an average inflation of 2%, began raising interest rates in March to cool the economy, and indicated that more increases were on the way.

Veronica Clark, an economist at Citigroup, said Friday’s numbers were unlikely to alter those plans. “With core PCE inflation up about 5% in each of the past four quarters, we don’t expect a change in the near-term outlook for Fed policy,” she said.

The The US economy contracted In the first quarter at an annualized rate of 1.4%, due in large part to a widening trade deficit and a slower pace of inventory buildup. But, Consumer expenses up at an annual rate of 2.7% in the first quarter, up slightly from the previous quarter.

Strong consumer demand continues to outpace supply, putting upward pressure on prices. Another widely followed inflation measure, the Labor Department’s Consumer Price Index, rose 8.5% in March from a year earlier, the highest level in four decades. Producer prices jumped 11.2% on a 12-month basis in March, for the fourth consecutive month with double-digit gains, the department said.

Airlines, gas stations, and retailers use complex algorithms to adjust their prices in response to cost, demand, and competition. Charity Scott of WSJ explains what dynamic pricing is and why companies use it so often. Illustration: Adele Morgan

The CPI usually runs a lot hotter than the PCE because of the differences in the spending groups on each snapshot. The CPI measures changes in the cost of living based on what urban consumers spend out of their pockets for a hypothetical basket of goods and services. By contrast, the PCE index includes prices in rural areas and those that organizations pay on behalf of households—for example, employer-sponsored health care plans.

Both indicators showed that energy prices rose in March, then Russia’s invasion of Ukraine In late February. The energy personal consumption expenditures index jumped 33.9% in March from a year earlier. The Commerce Department reported that food prices also rose sharply, up 9.2% last month, accelerating from 8% in 12 months in February.

Omair Sharif, founder of Inflation Insights LLC, said monthly figures suggest core inflation could be on track to decline significantly by midsummer. “The bigger story is that if we can maintain a slower pace during the second quarter, we will see a significant drop in the annual rate from about 5.3% in March to about 4.2% or 4.3% by June,” he said. That would be close to the Fed’s forecast that core inflation will fall to 4.1% in the fourth quarter of this year.

write to Gwen Guilford in gwynn.guilford@wsj.com

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