By Howard Schneider

WASHINGTON, (Reuters) – U.S. consumer inflation reached an additional four-decade-high in March. It was 8.5% due to record gasoline prices. However, the data showed enough weak spots that some Wall Street pundits declared “peak inflation”.

Federal Reserve sure hopes so. The Federal Reserve officials are telling us that the long-awaited cresting may have arrived.

Lael brainard, Fed Governor, spoke on Tuesday following the publication of the Consumer Price Index. She stated that her main indicator of month-tomonth inflation slowing in March had given her confidence in “achieving” the Fed’s 2% inflation goal.

The core CPI, which excludes food and energy costs, was lowered by the drop in prices for used cars. The annual increase of overall inflation, which policymakers consider the proper focus, continues to drive up the rate at which price rises.

As a result, the central bank is already making what might be the biggest move to tighten monetary policies in recent Fed history. The risks of making a mistake and even a recession will rise if the central bank becomes more aggressive.

The Fed has not received any recent data regarding inflation and how people view it. However, some believe there is a silver lining. Maybe.

Take a look at these photos:

PRICE PRESSURES HAVE BROADEN

Last spring saw an increase in inflation. At first, policymakers believed it was a temporary reaction to the pandemic. The arrival of vaccines and government assistance payments created a surge of demand which crashed against the stifled global supply chains. Prices have risen for both goods and services since then.

GRAPHIC: Pandemic inflation https://graphics.reuters.com/USA-FED/INFLATION/gkplgqobovb/chart.png

PANDEMIC “LOSERS” REBOUND

The prices have increased even for the industry that was hit the hardest by the pandemic. This is despite the fact that it didn’t take an entangling global supply chain and a shipping crisis to cause it. When the quarantines ended, many people began to travel, book hotel rooms and go out to eat again. Workers discovered they were more able to bargain in tight labour markets, which led to higher wages. Prices are rising because of higher demand and increased operating costs. This is in addition to consumers willing to spend.

GRAPHIC: Changes in contribution to inflation https://graphics.reuters.com/USA-FED/INFLATION/akpezjknmvr/chart.png

BACK TO BASICS

Inflation was most acutely felt by consumers in the areas of car prices and other consumer goods. Sticker shock was common during the pandemic.

Recent price rises have been driven by necessities such as food, shelter, and transportation.

GRAPHIC: Price of daily life climbs https://graphics.reuters.com/USA-FED/INFLATION/xmvjoqmjwpr/chart.png

EXPECTATIONS CONTAINED

For the Fed, the main good news is that the Fed seems to be able to keep its inflation expectations contained over time. Inflation-linked security traders believe that expectations play an important part in setting prices and wages. A sign of a peak could be the slowing month-to-month pace in core price rises in March (and falling for core goods)

GRAPHIC: ICE (NYSE:) inflation expectations index https://graphics.reuters.com/USA-FED/INFLATION/akvezxjwrpr/chart.png