US: March inflation surges above expectations

In the USA, headline CPI increased by 0.6% on a monthly basis and increased by 2.6% on an annual basis in March.

In the USA, headline CPI increased by 0.6% on a monthly basis and increased by 2.6% on an annual basis in March. On the core inflation side, where volatile items such as food and energy are excluded, monthly and annual increases are 0.3% and 1.6%, respectively. Market expectations were 0.5% and 2.5% monthly and 2.5% in the headline CPI, and 0.2% and 1.5% monthly and 1.5% in the core CPI.


When we look at the sub items; Gasoline prices continued to rise, increasing by 9.1% in March, accounting for about half of the seasonally adjusted increase in the all-item index. The natural gas index also rose, contributing to the 5% increase in the energy index during the month. The food index increased by 0.1% in March. On the core inflation side, excluding food and energy, the annual realization in March was 1.6%, after the 1.3% annual increase in February. Indices such as housing, motor vehicle insurance, entertainment, and household goods increased throughout the month. Clothing and education indexes fell in March.


Energy (intensely rising oil and commodity prices are effective), energy services (same effect) and transport services (both the same effect and movement between cities) appear to be the main drivers of inflation. This shows the effect of a price-influenced inflation on goods and services. It is also necessary to see periods such as April and May when vaccines and openings will be a little more effective. Because then we will be able to see how much the demand effect will stimulate prices. This is important; The Fed does not look at the rise in inflation, but looks at where inflation comes from and its permanence. So it is not a basis for tapering alone, but when the economy continues to recover, the Fed may have to communicate either early next year or late this year in order to inevitably raise interest rates at the end of 2022. The growth effect in the US economy will gain weight and the employment recovery will accelerate. Then, for the recovery speculation, the weight of sight in the summer FOMCs will be important.


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