For some time, inflation finally started to ease in March when interest rate hikes by The Fed paid off based on reports on Wednesday.
The consumer price index, a widely followed measure of the cost of goods and services in the U.S. economy, rose 0.1% for the month versus the Dow Jones estimate of 0.2% and 5% from a year ago versus the 5.1% estimate.
Excluding food and energy, core CPI rose 0.4% and 5.6% on an annual basis, both as expected.
The data shows that although inflation is still far above the target level, it is at least showing signs of continued decline. Policymakers target inflation around 2% as a healthy and sustainable level of growth.
A 3.5% drop in energy costs and an unchanged food index helped keep headline inflation under control. Household food fell 0.3%, the first decline since September 2020.
The 0.6% increase in the cost of protection was the smallest gain since November, but still caused prices to rise 8.2% on an annual basis. Hedging costs make up about one-third of the weighting in the CPI and are closely watched by Fed officials.
Used vehicle prices, the main contributor to the early inflation spike in 2021, fell another 0.9% in March and are now down 11.2% year-on-year. The cost of medical care services also fell 0.5% for the month.
Over the past year or so, the Fed has raised its benchmark interest rate nine times for a total of 4.75 percentage points, the fastest rate of tightening since the early 1980s. Officials initially dismissed inflation as temporary, expecting it to fall as pandemic-related factors faded, but were forced to take aggressive measures as price rises proved more durable.
One key area targeted by the central bank is the labor market. The lack of workers has helped push up wages and prices, conditions that have eased somewhat in recent months.
In March, the NFP reading rose by 236,000, the smallest gain since December 2020, and average hourly earnings rose at an annual rate of 4.2%, the lowest level since June 2021.
The US dollar index fell further with a decline of 0.63% after the report was released!
