Annual inflation rose in March and underlying price pressures remained strong, raising questions about how much the US Federal Reserve will be able to cut interest rates this year.
The Wall Street Journal Edition writesthat the consumer price index – a measure of prices for goods and services – rose 3.5% in March compared with a year earlier. So-called benchmark prices rose 3.8% from a year earlier. Of particular interest to investors and economists is the 0.4% rise in core prices in one month. This was higher than economists’ expectations, who had predicted 0.3%.
US Treasury yields rose immediately after the report, reflecting bets that the data could delay and ease interest rate cuts. The latest data showed inflation was higher than expected in January and February, a welcome reversal from reports that showed a marked slowdown in price growth.
Analysts say a third straight month of disappointing inflation data could prompt more significant changes to the Fed’s inflation and policy outlook.
Reduced rates
Last month, some Fed officials believed there would be at least three rate cuts this year if inflation continued to fall. Interest rate futures indicate investors are broadly holding the same outlook. Some believe that the Fed will cut rates once or twice, or not at all.
Employment data reinforced that skepticism. They showed that the economy added far more jobs than expected in March, which may suggest that rising interest rates are not such a major limiting factor.
However, many economists remain optimistic that inflation is easing. Among other things, they say the January data may have been bolstered by a one-time price adjustment earlier in the year. They also argue that recent strong economic growth and strong employment can be partly explained by increased immigration.
Rather than fueling inflation, this influx of workers may reduce competition for labor and make it easier for businesses to meet demand for their products, thereby keeping prices down.
Other inflation index
The Fed still prefers another indicator to assess inflation – the price index for personal consumption expenditures, or PCE, which includes not only data on the CPI, but also data on the producer price index. In recent months, PCE has painted a rosier picture for Fed officials and investors. Excluding food and energy, the PCE index rose 2.8% in February from a year earlier.
By all measures, inflation has fallen significantly since mid-2022, when prices rose about 9% from a year earlier.
Expectations in the US
Polls show Americans remain dissatisfied with the cost of living. Consumer sentiment indices are gradually improving, but remain well below pre-pandemic levels. Thus, 74% believe that inflation over the past year has been moving in the wrong direction.
This may be affecting sentiment, as some important interest rates have risen recently. For example, mortgage rates are closely tied to long-term U.S. Treasury yields, which have risen this year as investors cut bets on the Fed’s rate cut.
The average 30-year fixed mortgage rate is holding steady at 6.8%, up from 6.6% at the end of last year and 3.7% at the end of 2019, according to Freddie Mac.
Inflation in Ukraine – latest data
In March 2024, inflation in the consumer market was 0.5% compared to February. It is worth noting that the rate has accelerated compared to 0.3% in February.
During the year, from March 2023, prices in the consumer market increased by 3.2%. In annual terms, inflation slowed because in February the annual rate was 4.3%.
In the consumer market in March, prices for food and non-alcoholic drinks generally decreased by 0.2%.
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2024-04-10 13:48:00
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