In March, the prices of American consumers rose in the largest proportion in more than 8 -- 1 -- 2 years as massive fiscal stimulus unleashed pent-up demand, kicking off what most economists expect to be a brief period of higher inflation.
The report from the Labor Department on Tuesday also showed a strengthening of the underlying prices last month as strong demand bumps against supply constraints. Jerome Powell and many economists view higher inflation as more efficient, with supply chains expected to adapt and become more efficient. Significant slack remains in the economy: Consumer price index jumped 0.6% last month, the largest gain since August 2012, after rising 0.4% in February.
Gasoline prices soared 9.1%, accounting for almost half of the increase in CPI last month. This followed a 6.4% increase in February, food prices edged up 0.1% last month. The cost of food consumed at home and away from home also increased 0.1%. Economists polled by Reuters had predicted the CPI in India was moving 0.5% higher. The CPI grew 2.6% during the 12 months through March and followed a 1.7% increase in February.
The jump reflected mostly the dropping of weak springs from the calculation. U.S. stocks were little changed at the open; the dollar had slipped against a basket of currencies. The U.S. Treasury prices were lower, Excluding volatile food and energy components the CPI was increased in February by 0.3% after taking up 0.1%. The largest gain in seven months in the so-called Core CPI was driven by a higher rents, higher motor vehicle insurance costs as well as more expensive recreation and household furnishings.
But apparel prices fell as did education cost, the core CPI increased 1.6% year on year in February after he was increased by 1.3% in February. The Fed tracks the 2% inflation target, a flexible average, for its core personal consumption expenditures price index. The PCE- price index is at 1.5%; the government reported last week that producers prices jumped in March.
That was in sync with several business surveys showing an acceleration of cost pressures, largely related to bottlenecks in the supply chain due to worker absenteeism due to the pandemic. The main concern of manufacturers is chronic shortages of the basic materials, rising commodities prices and difficulties in transporting finished goods. Fractured supply chains are seen to trigger price pressures together with nearly$ 6 trillion in government relief since the COVID- 19 pandemic barreled through the United States in March 2020.
In addition, the Fed has slashed its benchmark quarterly interest rate to near zero and is pumping money into the economy through monthly bond purchases. But the labor market slack could make it harder for companies to pass on higher production costs to consumers. In February 2020, employment remains 8.4 million below its peak level in February.