- The Consumer Price Index rose 8.5% in the year through March, the government announced Tuesday.
- That matched the median forecast from economists surveyed by Bloomberg.
- The Russia-Ukraine conflict boosted inflation by lifting prices for gas and other key commodities.
Americans just got their first official look at how much the Russia-Ukraine conflict is boosting overall inflation.
The Consumer Price Index — a closely monitored gauge of broad inflation — rose 8.5% year-over-year in March, the Bureau of Labor Statistics said Tuesday. That matched the median estimate from economists surveyed by Bloomberg. The print shows inflation accelerating yet again from February's 7.9% rate.
The 8.5% leap also reflects the most rapid one-year price surge since December 1981.
The report reveals just how much the war in Ukraine has already affected price growth in the US. The conflict, which kicked off in late February and has shown no signs of easing, quickly raised concerns of even loftier inflation. The war itself further inflamed the world's supply chain mess, and the west's sweeping sanctions against Russia sparked fears of new strains on commodity markets.
Among the hardest-hit was the energy sector. The US, UK, and EU have all imposed bans on at least some Russian energy commodities including crude oil and natural gas. The announcements of such measures powered sharp increases in crude costs and lifted US gas prices to record highs. The CPI report underscores the run-up, with the index's energy segment climbing 32% and gas prices leaping 48% in the year through March.
Those rallies, however, are already somewhat stale. Prices have since eased, partially cooled off by President Joe Biden's announcement that the US will release 1 million barrels of crude oil from its strategic reserves every day for six months. Should the April trend continue, it's likely energy inflation will cool from March's extraordinary pace.
The headline index also gained 1.2% in March alone, also matching the median forecast. Month-over-month readings are typically viewed as a more prescient inflation print, as the one-year gains are skewed by the economic backdrop seen one year ago. With the economy only just starting to reopen in March 2021, the year-over-year reading includes months that saw a wave of pent-up demand quickly unleashed as lockdowns were reversed.
The core CPI measure, which excludes volatile energy and food prices, is a similarly insightful alternative. The gauge rose 6.5% in the year through March and 0.3% in March alone, with both prints landing just below forecasts. The core index is largely regarded as a more accurate yardstick for long-term inflation, as it covers price increases that are less likely to reverse course in the near term.
Fuel oil counted for the largest one-month price increase, with prices soaring 22.3% between February and March alone. Gasoline followed with a 18.3% gain. Transportation services notched a healthy uptick of 2%, likely powered by the rise in energy prices.
Month-over-month inflation cooled for used cars and trucks as prices slid 3.8%. Commodities outside of the food and energy sectors also posted a minor decline.
While the March print signals inflation will only hammer Americans' finances harder in 2022, some experts are hopeful that the year-over-year measure won't get much higher. March is set to represent the peak for pandemic-era inflation, UBS economists led by Alan Detmeister said in a Wednesday note to clients. The bank sees CPI inflation cooling to 8% in the April report and the measure slowing all the way to 3.4% by the end of the year.
Still, upside risks to the encouraging forecast "are notably elevated over the next few months," the team said. The war in Ukraine could bring new pressures to supply chains, and while Biden's oil release has dented prices, they still remain well above levels seen mere months ago. Yet the Federal Reserve is also poised to accelerate its rate-hike plans in the months ahead, signaling an even more aggressive fight against inflation.
March could very well represent peak inflation, but the path forward remains incredibly uncertain.