The US March inflation rate of 8.5% beat the previous high of 7.9% set last February. As far as inflation goes in the United States, it’s up, up, and away.
In particular, everyday items surged to their highest prices since December 1981. This is according to data reported by the Labor Department’s Bureau of Labor Statistics.
8.5% March Inflation Rate Highest Since Reagan Administration
Prices of commodities rose 8.5% compared to their levels in March of last year. This means that the March inflation rate is the highest since the early days of the Reagan administration.
The 8.5% inflation rate is also 0.1% higher than the Dow Jones estimate for March.
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Excluding food and energy, the core Consumer Price Index (CPI) rose by 6.5% compared to numbers exactly 12 months ago. Despite the jump, the Labor Department thinks that inflation might be cooling down a bit.
Core inflation rose by only 0.3% compared to the previous. This number bested estimates of a 0.5% rise. As a result, officials hoped that overall inflation is now slowing down. If this is the case, then the March inflation rate might be at its peak.
Stocks Rise As Government Bonds Declined
Markets reacted positively to the report as stocks rose and government bond yields declined.
Andrew Hunter, the senior US economist at Capital Economics, welcomed the development. “The big news in the March report was that core price pressures finally appear to be moderating,” he said.
Hunter agrees that the March inflation rate might represent the peak. As energy prices subside at the same time, the inflation numbers might start falling.
Federal Reserve Governor Lael Brainard agreed as well. He said that the lower-than-expected increase in core CPI is a “welcome” development. ″“I’ll be looking to see whether we continue to see a moderation in the months ahead,” Brainard said.
Record Price Increases for Everyday Goods
Going back to the present, the March inflation rate showed price increases not seen since forty and fifty years ago. The March headline rate of 8.5% is the highest since December 1981. Meanwhile, the core inflation rate is the highest since August 1982.
Ultimately, this means that worker wages are struggling to keep up with the price increases. Despite rising by 5.6% last year, wages are way behind the inflation rate.
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In fact, real average hourly earnings registered a 0.8% decline for the month. As a result, inflation continues to go on the rise as wages continue to remain behind.
Fed Raises Interest Rates
To fight the rise of inflation, the Federal Reserve started raising interest rates last month. The agency will continue to gradually hike the interest rate six more times this year and more next year.
According to history, the last time the Fed raised interest rates to almost 20%, the economy went into recession.
This time, economists don’t expect a recession to happen. However, many onlookers on Wall Street are expecting a likely downturn.
Ian Shepherdson, the chief economist at Pantheon Macroeconomics, says to expect the unexpected. “Overall, this report is encouraging,” he said.
However, it’s too early “to be sure that the next few core prints will be as low,’ Shepherdson added. While everybody expects inflation to drop, “the speed of the decline is what matters.”
Watch the CNBC Television news video reporting that Inflation climbs 8.5% in March, the highest level since December 1981:
What do you think of March inflation rates hitting 8.5%? Given that the core inflation rate registered a slower increase, is this a sign of recovery? Let us know what you think. Share your thoughts below.