U.S. consumer prices barely rose in March as the cost of gasoline declined, but stubbornly high rents kept underlying inflation pressures simmering, likely ensuring that the Federal Reserve will raise interest rates again next month.
Nevertheless, the mixed report from the Labor Department on Wednesday offered some encouragement in the fight against inflation. Services inflation showed signs of moderating. Rents, though still high, rose at their slowest pace in nearly a year.
The cost of food consumed at home fell 0.3%, the first decline since September 2020. Egg prices tumbled 10.9%. Meat, fruits and vegetables were also cheaper. But prices for cereals and bakery products as well as nonalcoholic beverages increased. It also cost more to eat out. In the 12 months through March, the CPI increased 5.0%, the smallest year-on-year gain since May 2021. The CPI rose 6.0% on a year-on-year basis in February.
With an easing in financial market stress following last month's collapse of two regional banks, economists expect the U.S. central bank to raise rates one more time in May before pausing its fastest monetary tightening campaign since the 1980s in June. Owners' equivalent rent , a measure of the amount homeowners would pay to rent or would earn from renting their property, rose 0.5%. That was the smallest gain since April 2022 and followed a 0.7% increase in February.
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