In March, inflation decreased to a two-year low of 5%, driven by drops in gasoline and grocery prices. However, the core consumer price index, which excludes volatile food and energy items and is a better reflection of long-term trends, increased by 0.4% from February, reflecting a surge in rent. Although goods inflation is easing as pandemic-induced supply chain disruptions resolve and commodity prices fall, the decline is slow and erratic. Services prices are rising more sharply. The report is expected to strengthen the Fed’s plans to raise its key interest rate by another quarter percentage point in May, with a view to curbing inflation, although there may be a pause to assess the effects of the Silicon Valley Bank crisis on the economy. While gas prices have decreased, grocery prices are still up annually by 8.4%, but this is down from 10.2% in February. Rental prices continue to be a significant factor in inflation, with the US median rent rising 18% in the past two years. However, newly constructed apartments are expected to come on the market this year, which should bring rental prices down.
