US Inflation Rate Slowed Down But Is Still Above The Fed's Target

President Biden's comment, details on 'core' inflation, stock market updates

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Although the Federal Reserve has increased interest rates numerous times over the past year, the pace of consumer inflation slowed in March.

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According to the Bureau of Labor Statistics, inflation slowed to 5.0 percent last month from 6.0 percent in February, the lowest rate since May 2021.

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On a seasonally adjusted basis, March's reading did not exceed analyst expectations, although it was lower than February's 0.4 percent increase.

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In spite of President Joe Biden's remarks that inflation is improving, some experts have noted that it remains well above the Federal Reserve's two percent target, particularly when food and energy costs are excluded.

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Neil Saunders, managing director of GlobalData Retail, said, "The good news is that inflation continues to fall.".

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Nevertheless, there are still a number of households who continue to choose what and how they will buy in order to balance their budgets as a result of inflationary behavior, which means many households are still being forced to make choices regarding what and how they will buy.".

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There is still a strong possibility that the Federal Reserve will raise interest rates again next month, though it will only do so by 0.25%, not as much as a few months ago.

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It is important to note that despite high housing costs, a significant drop in energy prices contributed to the milder inflation number, which has been offset by a rise in energy prices.

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There has also been an acceleration in the price hikes for new vehicles and medical care products.

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Cereals, bakery products, nonalcoholic beverages, and meats were the most expensive food items in the quarter.

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According to a White House press release, Biden credited the drop in gasoline and grocery prices as evidence of progress in the fight against inflation.

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Biden said that while inflation remains too high, the progress means that hardworking Americans have more breathing room.

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During the first half of 2021, inflation roared back to life in the United States and other major economies after years of anemic pricing pressure.

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There were a number of factors that contributed to the rise of consumer demand, such as supply chain problems that limited the availability of key goods; government fiscal packages that kept consumers' demand high; and the Russian invasion of Ukraine, which caused energy market volatility to increase and some commodities to be unavailable.

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Central banks have been raising interest rates aggressively in response to soaring inflation, such as the Fed and European Central Bank in March when they raised rates despite concerns over the instability of the banking industry, in response to soaring inflation.

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Although Wednesday's report had a better headline inflation figure than the previous week, analysts noted that the reading of inflation when food and energy were stripped out remained troubling, even with the better headline reading.

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According to the February report, core inflation at the beginning of the year was 5.6 percent, up from 5.5 percent in the previous month.

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FHN Financial's Chris Low noted that core services increased in March from the previous month, suggesting that the latest data would keep the Fed on its toes and support a rate hike in May, as well as perhaps demonstrating to the Fed that if it truly wants to contain wage pressures, it should start thinking beyond the next meeting.

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Jason Schenker at Prestige Economics called the report "mixed," noting that high inflation rates may not plateau and remain at these levels if the state of the core figures supports such moves in the near term.

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Although the report is disappointing, it shows the Fed's hikes in interest rates over the last year are having a negative impact on economic growth.

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There have been some signs of a slowdown in manufacturing and the services sector, despite generally strong labor market data.

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A 0.1 percent decline in the S&P 500 was reported in late-morning trading after US stocks opened higher.

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