Investors were closely watching the inflation print or the Consumer Price Index (CPI) with expectations running high that inflation is likely to cool down further. This report is one of the major data releases before the Fed’s policy-making meeting in May and is likely to decide whether the central bank will continue to raise interest rates or hit a pause on the rate hikes.
Economists had projected inflation to decelerate significantly to an annual rate of 5.2% from the 6% rate in February. On an unadjusted basis, annual inflation increased by 5% – the smallest yearly rise since May 2021. However, this inflation rate is still more than the Fed’s objective of inflation at 2%. On a month-over-month basis, inflation rose by 0.1% in March, versus estimates of an increase of 0.3%.
Core CPI, which excludes both food and energy price increases, is considered to be a better indicator of the price growth ahead. Core CPI grew by 0.4% last month, in line with estimates. On an annual basis, core CPI increased by 5.6%, indicating that inflationary pressures remain.
Rent prices have proven to be stickier and reflected continued price strength in March as it ticked up by 0.5%. The food index remained unchanged from February while the rising shelter index was the largest contributor to the CPI. The cost of shelter rose 8.2% over the past year. The energy index declined by 3.5% last month while on an annual basis, it fell by 6.4%.