Topline
Annual inflation fell for a ninth-straight month in March—temporarily easing concerns about the future of the Federal Reserve’s tightening campaign as some experts worry that uncertainty over recent bank failures and a potential recession may complicate the path of inflation.
Key Facts
Consumer prices rose 5% on an annual basis, according to data released by the Labor Department on Wednesday, marking the smallest year-over-year increase since May 2021 and coming in better than economists expected after a 6% spike in February.
Rent prices were “by far” the biggest contributor to overall inflation, more than offsetting a decline in energy prices, which decreased 3.5% over the month, the government said.
Core inflation, which excludes volatile food and energy prices, rose 0.4% on a monthly basis in March—falling in line with projections but still historically high as prices for car insurance, airplane tickets, furniture and new cars all continued to rise.
Stock futures spiked immediately after the data, with the Dow Jones Industrial Average and tech-heavy Nasdaq erasing early morning losses to trade up 0.7% and 1.2% by 8:45 a.m. ET, respectively.
Key Background
The Federal Reserve has pushed interest rates up to the highest level in 15 years in order to help temper inflation that remains well above the central bank’s historical 2% target. The labor market has started to show signs of weakening, and already the economic tightening has fueled a housing market correction, stock market downturn and just last month, a batch of high-profile bank failures. Nevertheless, officials have hinted they may not be done hiking rates, forecasting at least one more increase in their latest meeting on March 22.
Chief Critic
“Investors are increasingly concerned that the Fed’s overtightening… could steer the U.S. economy into a recession,” says Green, noting interest rate changes can take up to 18 months to ripple through the economy, slowing more rate-sensitive sectors (like housing and tech) first before spreading to others. “With inflation seemingly having peaked… officials now need to take their foot of the brake.”
Inflation Fell To 6% In February (Forbes)
Job Growth Unexpectedly Slows As Employers Freeze Hiring (Forbes)
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