Consumer prices rose 5% from a year ago in March, the slowest since May 2021

Consumer prices rose at the slowest pace since May 2021 as inflation showed further signs of abating in March, according to the latest data From the Bureau of Labor Statistics released Wednesday morning.

The Consumer Price Index (CPI) revealed that headline inflation rose 0.1% MoM and 5.0% YoY in March, a slowdown from February’s 0.4% MoM increase and 6% YoY gain.

Both measures were slightly better than economists’ expectations for a 0.2% month-over-month increase and a 5.1% annual increase, according to data from Bloomberg.

The 5% jump in inflation represents the slowest annual increase in consumer prices since May 2021, but still well above the Fed’s 2% target. The Federal Reserve has been raising interest rates in an effort to lower inflation, but the central bank risks tipping the economy into a recession by raising interest rates too quickly.

“If I think of the economic outlook as four possible scenarios: (1) a soft landing, (2) a recession, (3) a continued warming, (4) stagflation — the odds of stagflation decreased while the odds of a soft landing decreased Good news for stocks, Neil Dutta, head of economics at Renaissance Macro Research, wrote in response to Wednesday’s report.

On a “core” basis, which excludes the more volatile costs of food and gas, prices in March rose 0.4% from the previous month and 5.6% from a year ago. Both metrics were in line with economists’ expectations, according to Bloomberg data.

Core inflation remained particularly steady last month amid rising rents. The rent index and the owner-equivalent rent index rose 0.5% in March after larger increases in the previous month. Owner’s equivalent rent is the default rent that the homeowner will pay.

The shelter index is up 8.2% over the past year, which is more than 60% of the total increase in core inflation.

US stocks rose in pre-market trading immediately after the release of the data. Treasury yields initially moved to the upside, but then fell by 9 basis points to around 3.36%.

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The energy index fell 6.4% for the 12 months ending in March, while the food index rose 8.5% from a year ago. The energy index fell 3.5% in the February-March period on a seasonally adjusted basis, led by a 4% decline in the price of fuel oil. Gas prices decreased 4.6% from the previous month on a seasonally adjusted basis. They are down 17.4% annually.

Food costs saw some delay in March with the food index unchanged while the household food index fell 0.3%, the BLS noted. Egg prices fell 10.9% in March.

Wednesday’s data, a crucial component in determining the Fed’s monetary policy, comes on the heels of the latest jobs report, which showed a slowdown in hiring last month.

According to data from The Bureau of Labor Statistics released FridayThe US economy added 236 thousand jobs in March while the unemployment rate fell to 3.5%. With that said, the slowdown probably won’t be enough for the Fed to halt its aggressive rate hike campaign.

After the inflation data was released on Wednesday, markets were pricing in a nearly 70% chance that the Federal Reserve would raise rates by another 0.25% in May, According to data from the CME Group.

Ryan Sweet, chief US economist at Oxford Economics writes, “Although inflation has moderated, March consumer price data keeps a 25 basis point rate hike by the Fed clearly on the table for May. However, the odds of stopping in June are rising.” In a note on Wed. “The Fed made it clear that the decision to raise rates at the last meeting was close, but service inflation remains strong, and the labor market is tight, so their work is not finished.”

Forecasts released by the central bank last month indicated that an additional rate hike of 0.25% was likely this year. Retail sales data, due for release on Friday, will be another economic indicator for the Fed to consider.

Alexandra Channel He is a senior correspondent at Yahoo Finance. Follow her on Twitter aliecanal8193 and email it to [email protected]

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