WASHINGTON (Reuters – The U.S. saw its consumer prices rise by most since March 16-1/2. Russia’s invasion of Ukraine pushed the price of gasoline up to new records, causing annual inflation to increase at an unprecedented rate since 1980.

On Tuesday, the Labor Department released its consumer price report. This would confirm the Federal Reserve’s decision to hike interest rates next month by 50 basis point. The report would come on the heels last month’s data showing that the unemployment rate dropped to 3.6% in March.

In March, the U.S. central banking raised its policy rate 25 basis points. This was the first increase in interest rates in over three years. The minutes of last Wednesday’s policy meeting appeared to indicate that there will be big rate hikes down the line.

Sung Won Sohn is a Loyola Marymount University finance and economics professor in Los Angeles. “Inflation has reached a crescendo due to not only what’s happened in Ukraine but also what occurred in the past such as massive government stimuli and Federal Reserve printing money.” We should be expecting a half-point rate rise next month.

A Reuters survey found that March’s consumer price index gained 1.2%. This is the highest monthly gain since September 2005. It follows a 0.8% increase in February. AAA reports that gasoline prices rose to $4.33 per g in March.

While gasoline was most likely the major driver of inflation in October, food and services such a rental property are expected to make strong contributions. Russia is currently the second largest exporter in the world. In a series of sanctions against Moscow, the United States have banned Russian oil, liquefied, and coal imports.

Russia and Ukraine are the largest exporters of commodity commodities such as wheat and sunflower oil. Global food prices have risen due to the Russia-Ukraine War, currently in its second week.

The bond market is worried about a U.S. economic recession due to high inflation and Fed’s hawkish attitude, but most economists believe that the economy will expand.

CPI forecast to rise by 8.4% over the 12-month period ending March. This would mark the biggest year-on-year increase since 1982, and it would also follow an 8.9% rise in February. This would mark the sixth consecutive month with annual CPI readings above 6%.

INFLATION PEAKING

Economists think March will mark the highest annual CPI rate. However, they caution that inflation could remain high above the Fed’s target of 2% at the very least until 2023. While gasoil prices have fallen from records highs, they remain at $4 per gallon.

CPI will start to drop from last year’s very high inflation readings.

Sam Bullard is a senior economist. He stated, “But, inflation’s fall will remain painfully slowly for consumers, business and policymakers alike”. Wells Fargo Charlotte, North Carolina (NYSE:). “Services inflation (which includes housing) shows no sign of slowing down anytime soon.”

The moderation of prices for used trucks and cars likely led to an underlying inflation reading that was more manageable monthly.

The CPI should rise 0.5%, excluding volatile foods and energy. This is after an identical advance in February. According to this forecast, core CPI will rise 6.6% during the 12-month period ending March. That is a significant increase from the 6.4% recorded in February.

According to Veronica Clark (an economist at ), “Factors such as used cars or unfavorable bases effects could even cause an evident slowing of core inflation for a couple months this spring.” Citigroup New York (NYSE:). This would be temporary, and there are further upside risks due to higher commodity prices. Supply disruptions could also occur over the summer. These may cause the markets to price more in line with Fed expectations.

China is locking down its supply chains to prevent a rebound in COVID-19-related infections. This could lead to increased prices for goods. Inflation will be hotter due to rising rents in housing.

The key indicator of rents is the owners equivalent rent of their primary residence. It grew 4.3% year-on-year in February. This was the highest rate since January 2007.

This gauge is said to trail private sector measures. Although these indicators have shown signs of slowing over time, economists are not expecting this to reflect in CPI data. As people fled cities in panic, the landlords reduced rents but increased demand has resulted from the opening of the economy.

Michael Pond (head of inflation research at) stated that the robust recovery in labor market, increasing labor incomes, and healthy household balance sheets will support rental demand, even at higher prices. Barclays New York (LON) Although the peak in CPI rents is still at least 25% away, the moderation in rents privates has led to a decrease in rents. We caution that we don’t expect the trend to continue well beyond pre-pandemic levels in 2023.