Consumer price growth cooled further in March, which is welcome news for federal Reservemade the daunting choice of continuing with its federal funds rate hike despite failures at its March meeting Silicon Valley Bank And signature bank,
Thank you for reading this post, don't forget to subscribe!consumer price Index (CPI) rose 5.0% in March before seasonal adjustments from a year ago, a dramatic decrease from the 6.0% year-over-year jump posted in February, according to data released on Wednesday Bureau of Labor Statistics (BLS).
This was the smallest 12-month increase and the ninth consecutive month of decline since the year ending May 2021. Indexes contributing to annual growth were food (+8.5%), motor vehicle insurance (+15.0%), household goods and operations (+5.6%), entertainment (+4.8%), and new vehicles (+6.1%). Shelter also registered a significant increase, growing by 8.2% year-on-year and accounting for more than 60% of the total increase in the food and energy index among all commodities, which was 5.6% higher than in March 2022 .
In contrast, the energy index was down 6.4% compared to a year earlier.
“Inflation was down significantly in March, but we still haven’t reached the magic number the Fed is looking for. Housing costs are still a major driver of inflation, accounting for the largest share of the monthly increase in CPI,” said chief economist Lisa Sturtevant. bright mls, said in a statement.
The CPI also cooled on a month-on-month basis, registering a 0.1% monthly increase in March compared to a 0.4% monthly increase in February. Like the annual index, the energy index was falling 3.5% month-over-month, while the index for shelter jumped 0.6% from the month earlier as both the index for rents and the equivalent rents by owners rose 0.5% from a month earlier. Were. ,
Other indexes posting monthly increases include motor vehicle insurance (up 1.2%) and airline fares (up 4.0%), while medical care (down 0.3%), cars and trucks (down 0.9%), and home Contains index for food. (down 0.3%) all fell. This was the first time that the Food at Home index registered a decline since September 2020.
Despite the slowing of inflation, economists don’t believe that home buyers who still face high house prices on top of higher mortgage rates will be out of the woods any time soon.
“The challenge with housing is that there are a lot of factors beyond the control of the Federal Reserve that keep the cost of housing high. High inflation prompted the Fed to raise interest rates, which increased the cost of borrowing, Including making it more expensive to buy a home. Higher mortgage rates have slowed demand by pricing some buyers out of the market,” Sturwent said. “While house prices have fallen in some housing markets, year-on-year price declines have generally been modest and affordability is a growing challenge on both the ownership and rental side.”
Sturtevant recommends that the government look at policies to slow prices or rent growth, as she says higher interest rates alone will not improve the situation.
“Raising rates will not solve the housing affordability problem when a lack of supply has fueled a rise in house prices. We need more housing supply to drive down prices and make housing more affordable for more people Sturtevant said. “The Federal Reserve is not going to solve the problem, no matter how much some people hope that is the case. In reality, the solution lies in reducing regulation at the local level and providing the best benefits from jobs, transportation, services and amenities. The tough choice is to encourage more responsible housing in well-connected places.
