In March, inflation increased at a slower pace than in previous months, according to the latest consumer pricing data from the U.S. Bureau of Labor Statistics (BLS). The Consumer Price Index rose 0.1%, contributing to a 5% increase over the last 12 months, approximately double the rate economists consider healthy. Price changes varied across different goods and services, with the food at home index experiencing its first decline since September 2020.
Economists are uncertain whether the downward trend in inflation will continue. Jason Furman, an economist and Harvard professor, suggests that while there are reasons to expect a slowdown, assuming it will continue in the coming months would be a mistake. He advises thinking of inflation at a roughly 4% pace.
The U.S. Treasury has given lawmakers a deadline to raise the debt ceiling or risk defaulting on the national debt. President Joe Biden has faced criticism for the price increases during his administration, which some argue were fueled by trillions of dollars in federal debt spending. Republicans also point to elevated debt levels and the need for spending cuts ahead of the debt limit deadline.
Experts are uncertain how inflation will affect the Federal Reserve’s rate hike decisions. Charlie Ripley, Senior Investment Strategist for Allianz Investment Management, said the latest CPI data does not provide much room for the Fed to continue raising policy rates after the May meeting, suggesting that the peak in Fed policy rates may be approaching.
The latest economic data also shows that producer prices saw their most significant drop since the pandemic began, with the index for final demand decreasing by 0.5% in March. Despite this, it has increased by 2.7% over the last year.
The National Federation of Independent Businesses reported that their small business optimism index decreased in March, continuing a trend of lower optimism that has persisted for over a year.