In this morning’s data, the Consumer Price Index (CPI) increased 0.9% in March, as expected. On an annual basis it grew 3.3%, a bit less than expected. Both the monthly increase and annual increase are well above the previous month’s measures. The core rate, which excludes prices for food and energy, increased 0.2% in March, less than expected, and the same as the previous month. The core rate grew 2.6% on an annual basis, less than expected and is one-tenth higher than the previous month’s annual measure.
Looking at the individual categories, monthly prices for Gasoline, up 21.2% and Fuel Oil, up 30.7%, were extremely strong while monthly prices for Medical Care Commodities, down -1.0%, and Used Cars and Trucks, down -0.4%, were relatively weak. Prices for Shelter were up 0.3%, slightly higher than the previous month.
Overall, headline inflation measures in March were elevated primarily due to high oil prices given the Iran conflict. Both gasoline and fuel oil prices were up strongly, which were offset some by prices for medical care items and used cars and trucks. Meanwhile, shelter costs moved slightly higher. The core rate increased less than expected, which is welcomed, but the annual measure was higher than the previous month and remains above the Federal Reserve’s 2% target, as it has been since 2021.
The length of time that energy prices remain elevated is important as those prices can feed into other areas of the economy. With limited movement of oil vessels in the Strait of Hormuz and ongoing tariff impacts, it brings into question when inflation measures will moderate back to appropriate levels. How the Federal Reserve evaluates this dynamic for their policy decisions will be key for the economy and markets in the months ahead.
In all, the 10-year US treasury yield ticks lower following the report and equity futures are higher as we head into the market open.
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