(Bloomberg). — The U.S. Consumer Price Index rose by its highest level since 1981 in March, increasing expectations that the Federal Reserve would raise interest rates half-a point next month.

According to Labor Department data Tuesday, the consumer price index rose from one year ago after a 7.9% increase in annual growth. Inflation gauge, which is closely followed by many people, increased from one month ago. This was the largest gain since 2005. The monthly rise was driven by half the increase in gasoline costs.

A Bloomberg survey found that economists expected the CPI overall to rise 8.4% over a year and 1.2% in February, according to Bloomberg.

The March CPI reading represents what many economists expect to be the peak of the current inflationary period, capturing the impact of soaring food and energy prices after Russia’s invasion of Ukraine. While the Fed is shifting as such to more hawkish policy, inflation isn’t likely to recede to the central bank’s 2% goal anytime soon — especially given the war, Covid-19 lockdowns in China and greater demand for services like travel.

There are increasing risks of inflation causing the economy to fall into recession. Economists are predicting that the economy will shrink due to lower consumer spending or because of overcorrection by the Fed in its efforts to catch up. The majority of economists still believe that the economy will grow. 

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