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March consumer inflation expected to be the hottest since 1981

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One customer picks food out of a freezer in a New York City grocery store on January 12, 2022.

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In March, consumer prices are expected to rise at the fastest rate since December 1981. It is due to rising food costs and rents, as well as runaway energy prices.

Tuesday’s release of the consumer price indicator is at 8:30 AM ET. ET. Dow Jones predicts a month-over-year jump of 1.1%, while economists are expecting an increase of 8.4%. That’s compared to the February jump of 0.8% or 7.9%, which was the largest since early 1982.

Mark Zandi (chief economist, Moody’s Analytics) said that “it’s going to ugly.” “It’s a perfect storm — Russian invasion, surging oil prices, China locking down, further disruptions to supply chains, wage growth accelerating, unfilled positions. It’s a chaotic mess that has led to extremely high inflation. Our country is currently experiencing two major global supply shocks. It’d be difficult to imagine that inflation wasn’t higher.

Core inflation, excluding food and energy, is expected to rise a half percent — the same as February — and the year-over-year gain is expected to be 6.6%, up from 6.4%, according to Dow Jones.

According to Grant Thornton chief economist Diane Swonk: “The good news it looks like it will reach its peak due to oil prices.” Shortly after Russia invaded Ukraine in February, oil prices rose and reached a high point. West Texas Intermediate oil futuresEarly March: $130.50/barrel This price dropped to around $94 per barrel Monday.

The national average for unleaded gasoline was $4.33 per gallon on March 11. according to AAA.Monday’s price for a gallon was $4.11

Swonk said that “the problem for the Fed” is the expansion of the inflation rate from goods to services. Also, used car prices could be increasing again. They are getting worse.” They are getting worse.

Base effects aside, economists predict that next month and this month will be the top months for inflation. Zandi predicts that the headline CPI will drop to 4.9% before the year ends.

To rein in inflation, the Federal Reserve will likely tighten its policy to the maximum extent in 40 years. The market expects a half percentage point increase in May. Economists believe that a hot inflation report in June could lead to an additional half percent.

“The Fed is moving in the right direction. He said that it’s at most a quarter percent increase and that the balance sheets are starting to shrink.”

After reducing the Fed funds target rate to zero early in 2020, the Fed raised interest rates for only the second time in March.

Jefferies’ money market economist Tom Simons expects the Fed to raise rates 50 basis points by May 3. The CPI shouldn’t change this. He said that if the Fed’s expectation is significantly higher, and I doubt it, then there will be talk about a 75-basis point increase or intermeeting raise. I think that’s a lot of nonsense.

Simons indicated that CPI will see energy prices rise by 18% in March. The Russian invasion caused the first half of March to be particularly severe. Similar story, food prices not quite to the same degree. He stated that “Housing again is going to play a significant role.”

According to him, owners should expect their equivalent rent (or the price of a house in CPI) to increase by 0.5% while rents should go up 0.6% monthly. One area where rents are expected to rise is shelter costs. Shelter, which accounts for a third in CPI, would go up by 4.6% annually.

Swonk stated that shelter costs have increased the most since 1990 and could rise further.

Swonk said, “I feel there’s risk it comes into on the hotside.”

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