US inflation increases moderately; consumer spending boosts Q2 outlook
inflation rose moderately in March, but stubbornly higher costs for housing and utilities suggested the Federal Reserve could keep interest rates elevated for a while.
The report from the Commerce Department on Friday, which also showed strong consumer spending last month, offered some relief to financial markets spooked by worries of stagflation after data on Thursday showed inflation surging and economic growth slowing in the first quarter.
«Markets should breathe a sigh of relief this morning,» said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. «Given the elevated levels of inflation, and this is the new normal for 2024, the market is going to need to get over hopes for Fed rate cuts.»
The personal consumption expenditures (PCE) price index increased 0.3% last month, matching the unrevised gain in February, the Commerce Department's Bureau of Economic Analysis said. Goods prices edged up 0.1% as increases in the costs of gasoline, clothing and footwear were partially offset by a decline in prices of motor vehicles and parts.
Services prices rose 0.4%, quickening from February's 0.3% advance. They were boosted by a 0.5% increase in the cost of housing and utilities, which include rents. Rents have remained sticky even as the supply of apartments has increased and independent measures showed a decline in rent demands.
Economists expect that these lower rents should start showing up in the data at some point this year. Transportation services prices shot up 1.6%, while financial
