March Inflation - Energy Prices Raise Inflation

March’s inflation report saw prices rise 0.9% month-over-month and 3.3% over the year, led by energy prices which were up 10.9% in March as the war in Iran drove prices higher. Core inflation, which excludes volatile food and energy prices was up 0.2% month-over-month and 2.6% year-over-year. Expectations for inflation have risen since the start of the war and these figures came in slightly below median expectations of 1.0% month-over-month inflation and 3.4% year-over-year. The key question going forward relates to higher prices’ impact on the Federal Reserve’s easing plans. Today’s release did not significantly change the market’s expectations of only a 20% chance of one cut from the Fed in 2026, compared with expectations for 2 cuts before the war.

·      Consumer prices (CPI) increased 3.3% year-over-year.  In March, the consumer price index (CPI) increased 3.3%, accelerating from 2.4% in February.  The cost of energy (+12.5%), shelter (+3%), and household furnishings (+3%)  were key contributors to the overall increase, offsetting muted price increases in Food at home (+1.9%) and price declines used cars and trucks (-3.2%).

·     Consumer prices (CPI) rose 0.9% month-over-month.  In March, consumer prices rose 0.9% month-over-month led by higher energy prices (+10.9%). Core CPI (excludes food and energy) increased 0.2% month-over-month.