The March consumer price inflation is likely to be the highest since December 1981. This was due to higher food prices, rents rising, and runaway energy costs.
Tuesday’s release will include the Consumer Price Index at 8:30 AM. ET. According to Dow Jones, economists anticipate a 1.1% monthly increase and an 8.4% year-over-year rise. This compares to February’s 0.8% increase, which is 7.9% annually, and the highest level since 1982.
Mark Zandi chief economist of Moody’s Analytics said, “It’s going be ugly.” “It’s a perfect storm — Russian invasion, surging oil prices, China locking down, further disruptions to supply chains, wage growth accelerating, unfilled positions. This is a scrambled chaos that leads to high inflation. Two massive global supply shocks are causing us to struggle. We would find it difficult to believe that we haven’t experienced higher inflation.
Core inflation, excluding food and energy, is expected to rise a half percent — the same as February — with a year-over-year gain of 6.6%, up from 6.4%, according to Dow Jones.
The good news is that it appears like the peak will come because of high oil prices,” stated Diane Swonk chief economist at Grant Thornton. Shortly after Russia invaded Ukraine in February, oil prices soared to a record high. West Texas Intermediate oil futuresEarly March, the price was $130.50/barrel On Monday, the price fell to approximately $94 per barrel
Prices for gasoline also rose, with a national average price of $4.33/gallon unleaded by March 11th. according to AAA.The Monday price was $4.11/gallon.
Swonk stated that the Fed’s problem is an increase in inflation, both from goods to services, and because used car prices may be rising again. The supply chain problems aren’t going away. They’re only getting worse.”
Economists believe that this or the next month may be the highest level of inflation, based only on base effects. Zandi expects the headline CPI to fall to 4.9% at the end of 2012.
Federal Reserve policy will be tightened to contain the highest inflation rate in 40 years. Economists predict a half point increase in the market for May and a hot inflation report in June.
“The Fed is moving in the right direction. He said that it’s at most a half percent hike and that the balance sheets are starting to shrink.”
After reducing the Fed funds target rate to zero early in 2020, the Fed raised interest rates for only quarter of a point in March.
Jefferies’ money market economist Tom Simons anticipates that the Fed will raise rates by 50 basis point at its May 3, meeting. He also said that CPI should not affect this. “If it is dramatically higher than I expected, which it doesn’t, there’s going be talk of either a 75 basis-point increase or an intermeeting raise,” Simons said. It’s just nonsense to me. A basis point equals 0.01%.
Simons indicated that CPI will see energy prices rise by 18% in March. “The Russian invasion made the first two-thirds of March particularly difficult. Similar story, food prices not quite to the same degree. He said that housing again will be an important factor.
According to him, owners should expect their equivalent rent (or the price of a house in CPI) to increase by 0.5% while rents should go up 0.6% per month. One area where rents are expected to rise is shelter costs. Shelter, which accounts for a third in CPI, would go up by 4.6% annually.
Swonk claimed that the shelter cost rises have reached their highest level since the early 1990’s and are likely to continue rising. She stated that she believes there is a danger it will come in on the hotside.