WASHINGTON (AFP) – U.S.
government data on Tuesday confirmed what many Americans already suspected: prices continued to rise at record rates last month, continuing a phenomenon that began last year but which has been exacerbated by Russia’s invasion of Ukraine.
The Labor Department’s consumer price index (CPI) report for March was the first to fully encompass the shock caused by the war in Ukraine and the Western sanctions against Moscow, and is almost certain to show a spike in prices for gasoline and other petroleum products.
“Russia’s invasion of Ukraine has definitely added upside risks to U.S. inflation through channels such as energy, food and also elevated risks of supply bottlenecks lingering for longer,” Pooja Sriram of Barclays said.
Americans have been weathering steadily accelerating price increases that hit 7.9 percent over the 12 months to February, a rate not seen in four decades.
But as the Federal Reserve raises interest rates, some economists believe the report also marks the peak of the inflation wave that began last year as the economy recovered from Covid-19 -- though it could be a while before consumers feel relief.
“The subsequent slowing may not be meaningful given all the supply restrictions on products from Russia and Ukraine as well as the growing supply chain bottlenecks on finished goods from China due to the Covid lockdowns there,” Karl Haeling of LBBW said.
The inflation wave has become a political liability for President Joe Biden, and before the data’s release, the White House temporarily waived a seasonal ban on sales of E15 gasoline, which is cheaper but usually not allowed to be sold during the summer.
But that did not stop the Labor Department from reporting another sky-high year-on-year inflation number in March that analysts believe could hit somewhere around 8.5 percent.
After years of muted price pressures, inflation began climbing as the economy recovered a year ago, driven by the Fed’s pandemic-era easy money policies, global shortages of components and delays in shipping, and government stimulus packages that fattened Americans’ wallets and drove up demand.
The consensus among economists is for CPI to accelerate by 1.2 percent in March compared to February, but for “core” CPI, which excludes volatile food and energy prices, to rise by 0.5 percent in March, the same as the month prior.
Ian Shepherdson of Pantheon Macroeconomics predicted “this will be the peak” of the annual increases.