US consumer prices edge higher than forecast in March

US consumer prices rose more than expected in March, spurred by pent-up demand and rising petrol prices as the economy continued to recover from coronavirus-driven lockdowns.

The consumer price index rose a seasonally adjusted 0.6 per cent last month compared with February, the labour department said on Tuesday. That topped economists’ average forecast of a 0.5 per cent gain, according to a Reuters poll. It was fuelled in part by a jump in the petrol index, which surged 9.1 per cent.

For the year, headline inflation rose 2.6 per cent, ahead of expectations for a 2.5 per cent increase, the labour department said on Tuesday.

So-called core CPI — which strips out volatile food and energy prices — registered a monthly gain of 0.3 per cent and an annual rise of 1.6 per cent. Economists had forecast a rise of 0.2 per cent and 1.5 per cent respectively.

A ramp-up in vaccination rates and an easing of lockdown restrictions, alongside President Joe Biden’s $1.9tn fiscal stimulus package, are expected to unleash pent-up demand and temporarily lift inflation.

The annual figures, in particular, received a boost from so-called base effects — prices started to crumble this time last year as the US began lockdowns to curb the coronavirus pandemic.

The Federal Reserve at its March meeting revised sharply higher its inflation and growth forecast. However, the central bank has thus far shrugged off fears of a rapidly overheating economy and expects any jump in inflation to be temporary.

Investors are watching to see if the increase in prices is transitory as they try to determine how long the Fed can continue to provide ultra-accommodative monetary support, including asset purchases of $120bn per month and interest rates near zero. The Fed has signalled it does not expect to lift rates until 2024.

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The yield on the US 10-year Treasury, a key gauge of borrowing costs, stood at 1.678 per cent. S&P 500 stock futures were 0.1 per cent lower.



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