US annual inflation stands at 5% during March

US Inflation
FILE PHOTO: U.S. One dollar banknotes are seen in front of displayed stock graph in this illustration taken, February 8, 2021. REUTERS/Dado Ruvic/Illustration/

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US inflation cooled in March as interest rate hikes by the Federal Reserve (Fed) had a bigger impact, the Labor Department reported.

The Consumer Price Index in the North American nation registered an increase of 0.1% in its monthly comparison, below the 0.2% estimated by Dow Jones. In its annual comparison, the increase was 5%, it was also less than the projection of 5.1% given by the market.

According to the US institution, core inflation, which excludes food and energy due to its volatility, had a monthly increase of 0.4%, while the annual increase was 5.6%, in line with what was expected with the estimates. 

While US inflation data is still above a figure the Fed is comfortable with, it does reflect continued signs of a slowdown by posting the smallest overall increase since June 2021. 

Policymakers ideally have inflation around 2% to consider a healthy and sustainable level of growth. 

Markets are likely to react favorably to this report as investors gain more confidence that the next Fed meeting may be the last meeting when the Committee raises the federal fund’s target rate.

said Jeffey Roach, chief US economist at LPL Financial. 

Inflation in detail

One of the main contributors to the increase in inflation starting in 2021 was the price of used vehicles, which decreased 0.9% in March, bringing them down 11.2% year-over-year. 

Likewise, the costs of medical care services managed to register a decrease of 0.5% during March. In contrast, prices for home furnishings and motor vehicle insurance rose. 

Housing costs, which are the largest service component and account for about a third of the overall CPI index, rose 0.6%. Housing cost measures advanced at the slowest pace in about a year, while hotel prices rose the most since October.