U.S. consumer prices increased by the most in more than a year in March, but underlying inflation remained benign against the backdrop of slowing domestic and global economic growth.
The Labor Department said on Wednesday its Consumer Price Index rose 0.4%, boosted by increases in the costs of food, gasoline and rents. That was the biggest advance since January 2018 and followed a 0.2% gain in February.
In the 12 months through March, the CPI increased 1.9%. The CPI gained 1.5% in February, which was the smallest rise since September 2016. Economists polled by Reuters had forecast the CPI climbing 0.3% in March and accelerating 1.8% year-on-year.
Inflation has remained muted, with wage growth increasing moderately despite tightening labor market conditions. The tame inflation environment, together with slowing economic activity, support the Federal Reserve’s decision last month to suspend its three-year campaign to raise interest rates.
The U.S. central bank dropped projections for any rate hikes this year after increasing borrowing costs four times in 2018.
Excluding the volatile food and energy components, the CPI nudged up 0.1%, matching February’s gain. In the 12 months through March, the core CPI increased 2.0%, the smallest increase since February 2018. The core CPI rose 2.1% year-on-year in February.
The Fed, which has a 2% inflation target, tracks a different measure, the core personal consumption expenditures (PCE) price index, for monetary policy. The core PCE price index increased 1.8% on a year-on-year basis in January after a rising 2.0% in December. It hit the Fed’s 2% inflation target in March last year for the first time since April 2012.
The February and March PCE price data will be released on April 29. The February data was delayed by a 35-day partial shutdown of the federal government that ended on Jan. 25. Energy prices jumped 3.5% in March, accounting for about 60% of the increase in the CPI last month, after gaining 0.4% in February. Gasoline prices surged 6.5% after rising 1.5% in February.
Food prices gained 0.3% after accelerating 0.4% in February. Food consumed at home increased 0.4%. Consumers also paid more for rent. Owners’ equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, increased 0.3% in March after a similar gain in February.
Health-care costs rebounded 0.3% after slipping 0.2% in February. Apparel prices fell 1.9%, the biggest drop since January 1949, after two straight monthly gains. There were decreases in the price of used motor vehicles and trucks, airline fares and motor vehicle insurance.
The cost of new vehicles, however, rebounded 0.4% after declining 0.2% in February.