WASHINGTON (AP) — An inflation gauge closely tracked by the Federal Reserve surged 6.6% in March compared with a year ago, the highest 12-month jump in four decades and further evidence that spiking prices are pressuring household budgets and the health of the economy.
Yet there were signs in Friday’s report from the Commerce Department that inflation might be slowing from its galloping pace and perhaps nearing a peak, at least for now.
Excluding the especially volatile food and energy categories, so-called core prices rose 5.2% in March from a year earlier. That was slightly below the 5.3% year-over-year increase in February, and it was the first time that 12-month figure has declined since February 2021, before the inflation spike began. And on a month-to-month basis, core prices rose 0.3% from February to March, the same as from January to February.
Friday’s report also showed that consumers increased their spending by 1.1% last month, more than many economists had expected and a sign that inflation hasn’t yet caused Americans as a whole to pull back on shopping. The gain largely reflected higher prices at the gas pump, grocery store and other places where Americans shop for necessities. But even adjusted for inflation, spending rose 0.2%.
Sharp gains in wages and salaries are enabling many consumers to at least stay close to inflation. A separate report Friday from the Labor Department showed that employees’ pay and benefits jumped 1.4% in the first three months of the year, before adjusting for inflation. That was the highest such increase on records dating back two decades.
Inflation is surging outside the U.S. too
High inflation and strong wage increases are leading the Federal Reserve to plan a series of sharp interest rates hikes in the coming months. The Fed is set to raise its benchmark short-term rate by a half-point next week, a faster move than its typical quarter-point hike and the first increase that large since 2000.
Outside the United States, too, inflation is surging, forcing other central banks to either raise interest rates or move closer to doing so. In the 19 countries that use the euro, inflation reached a record high of 7.5% in April from a year ago.
In Europe, spiking energy prices stemming from Russia’s invasion of Ukraine are playing a bigger role in driving inflation. The European Central Bank may have to raise rates later this year even as growth in the region has …read more