The Consumer Price Index increased 5.0% between March 2022 and March 2023, indicating a brief respite from high inflation, even as prices in other categories continue to rise.
The 0.1% month-to-month increase fell short of economists’ predictions of a 0.2% gain, while core inflation, which excludes the more volatile food and energy categories, rose 0.4%, as expected. According to the Bureau of Labor Statistics, food costs were steady, energy prices fell 3.5%, and housing prices rose 0.6%.
“We are seeing some signs of softening in spending categories that have put a strain on household budgets, such as food and energy,” Bankrate Chief Financial Analyst Greg McBride told The Daily Wire. “However, aside from shelter, trouble spots remain, with household furnishing, motor vehicle insurance, and supplies, and apparel continuing to post consistent, yet somewhat disproportionate, monthly increases. Hopes for additional respite for household budgets are conditional on these softening price pressures persisting for several months across a wide range of categories.”
Despite a relative decrease from the 6.0% headline inflation recorded in February 2023, both electricity and food costs rose 8.5% and 10.2%, respectively, from March 2022 to March 2023. According to additional Bureau of Labor Statistics data, real salaries declined 1.3% year on year in March 2023, after accounting for the effect of inflation on nominal pay increases.
“Reducing price pressures on household staples such as energy and food are a step in a positive direction, but they may prove fleeting,” McBride added.
Inflation is over four times more than the 1.4% recorded in January 2021, the month President Joe Biden took office, but less than the 9.1% recorded in June 2022.
The drops in headline inflation occur as Federal Reserve policymakers raise target federal funds rates to battle increasing price levels. The collective increase in interest rates over the last year, however, has stunned the finance industry: Silicon Valley Bank was compelled to sell long-term government securities as well as company bonds at a loss to withdrawals of funds, resulting in the firm realizing heavy losses as a result of the higher rates and leading to the business’s implosion.
Despite falls in real earnings, which have a detrimental impact on household budgets, the job market remains relatively strong: the unemployment rate was 3.5% in March 2023, matching historic lows for the whole economy. Despite this, low labor force participation has contributed to supply chain bottlenecks as well as inflationary pressures as firms struggle to hire and raise pay.
Biden has often claimed that his government is successfully combating price hikes, despite the fact that inflation rates are three to four times higher than when he took office. “We are making progress in our battle against inflation,” he said recently. “The fight against inflation is far from over, and my administration is working hard every day to give families more breathing room.”
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