US inflation rising again, likely delaying Fed rate cut

WASHINGTON (AP) Consumer inflation remained persistently high last month, driven by gasoline, rent, auto insurance and other items, the government said Wednesday in a report that will likely make ponder the Federal Reserve as it considers how much or even if it should cut spending. interest rate this year.

Prices outside the volatile food and energy categories rose 0.4% from February to March, the same accelerated pace as the previous month. Measured over the previous year, these underlying prices are up 3.8%, unchanged from February's year-over-year increase. The Fed tracks core prices closely because they tend to provide a good idea of ​​where inflation is heading.

Wednesday's numbers represent a disappointment for the White House. Republican critics of President Joe Biden have sought to pin the blame for high prices on the president and use it as a stick to derail his re-election bid. Polls show that despite a healthy job market, a near-record stock market and inflation down from its peak, many Americans blame Biden for high prices.

The March figures, the third consecutive month of inflation well above the Fed's 2% target, provide worrying evidence that inflation is stuck at a high level after falling steadily in the second half of 2023. The latest figures threaten to torpedo the prospect of inflation significantly above the Fed's 2% target. several rate cuts this year. Fed officials have made it clear that given the healthy state of the economy, they are in no rush to cut their key rate, although they expect they will do so three times this year.

The report puts a damper on the idea that the faster January and February numbers simply represented the start of a price rise for the new year that was unlikely to persist, said Kathy Bostjancic, chief economist at Nationwide, in a research note. The lack of moderation in inflation will undermine Fed officials' confidence that inflation is on a sustainable path back to 2% and will likely delay rate cuts until September at the earliest and could postpone reductions rate next year.

On Wall Street, traders sent stock prices tumbling and bond yields rising, reflecting fears that the Fed would delay cutting interest rates indefinitely. The broader S&P 500 stock index was down about 1% in late morning trading.

Chairman Jerome Powell stressed that Fed policymakers need to have more confidence that inflation is gradually slowing to their target level before supporting a rate cut. Powell's stance raised the profile of monthly inflation data to determine when the Fed might begin cutting rates. Lower rates would, over time, lead to lower borrowing costs for businesses and consumers.

Overall consumer prices increased by 0.4% from February to March, the same as the previous month. Compared to last year, prices increased by 3.5%, up from 3.2% year-on-year in February.

Persistent high inflation in the United States complicates Biden's claims that he is making steady progress in combating rising prices. The president argued that further improvements would be possible if congressional Republicans supported his policies.

My agenda is to reduce the costs of prescription drugs, health care, student debt and hidden junk fees, Biden said in a statement.

Vehicle ownership costs are one of the main reasons prices jumped last month: auto insurance jumped 2.6% in March and was up 22% year-over-year last. This increase reflects, in part, the rise in new car prices over the past two years.

Average auto repair costs increased 1.7% from February to March and are up a sharp 8.2% from the previous year. And the price of gasoline to fuel most vehicles jumped 1.7% last month. The prices of new and used cars, however, fell slightly.

Clothing costs jumped 0.7% in March, the second straight month of significant increases, although they have barely increased over the past year. Food prices, however, remained unchanged last month and are just 1.2% higher than they were a year ago, providing some relief to consumers after huge increases in food prices over the previous two years.

Chronically high inflation so far this year suggests that U.S. consumers, on average, remain confident enough to continue spending despite steady price increases, said Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives, a research firm. advice. Likewise, she added, rising auto insurance and repair costs reflect previous sharp increases in automobile sales prices.

That means consumers are in good shape and still accepting price increases, Rosner-Warburton said.

Even though inflation has fallen since its peak of 9.1% in June 2022, average prices remain well above what they were before the pandemic. This has led to hardship for many low-income families, whose wages may not have kept up with rising prices.

Derrick Chubbs, president of the Second Harvest Food Bank of Central Florida, said his organization is providing 300,000 meals per day, more than the 250,000 it provided in November 2022. The people his organization serves, have- he declared, include more and more owners. And most of them have jobs.

Chubbs said recipients typically live paycheck to paycheck and are vulnerable to any abrupt changes in their financial situation. Most are still struggling to recover from rising costs over the past three years, including rent, child care and car ownership, a near necessity in a region where public transportation are limited.

If something destabilizes them, it will take some time for them to recover, Chubbs said. Just because things are getting better doesn't mean I've caught up with everything.

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AP writer Josh Boak contributed to this report.

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