The Bureau of Labor Statistics reported that the consumer price index rose 0.3 percent in March, slightly below its 0.4 percent gain in February. Energy costs, which had jumped 3.2 percent in February, increased 0.9 percent in March. Even with more recent easing, gasoline prices are 9 percent higher than one year ago. Food costs also rose, but at a more modest 0.2 percent rate. Food prices are now 3.3 percentage points higher on a year-over-year basis.
Core inflation, which excludes food and energy costs, rose 0.2 percent in March. On an annual basis, overall and core prices have risen 2.6 percent and 2.3 percent, respectively. The core rates have hovered in the 2.1 to 2.3 range for six consecutive months now. While this exceeds the Federal Reserve’s stated goal of not having core inflation exceeding 2 percent, consumer price growth remains modest overall.
Outside of food and energy, the largest monthly price increases were seen in motor vehicles (up 0.6 percent largely on higher used car and truck prices), apparel (up 0.5 percent), and medicinal drugs (up 0.4 percent).
These numbers reflect some relief in terms of slower energy cost growth. As such, while consumer prices were higher, overall inflation is in the acceptable range. Even with core inflation exceeding 2 percent, pricing pressures are not sufficient enough to warrant tighter monetary policy – at least not yet.
Chad Moutray is chief economist, National Association of Manufacturers.