Inflation Eases to 5 Percent in March But Housing Costs Continue to Keep It High
By Celia Young April 12, 2023 10:57 am
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Consumer prices rose 5 percent in March compared to a year prior in their smallest monthly gain since May 2021 due to lower food and energy prices, but housing costs continue to keep inflation high, according to data released by the Bureau of Labor Statistics (BLS) Wednesday.
The Consumer Price Index, which measures the cost of U.S. goods and services, rose 0.1 percent from February to March, slower than the 0.4 percent increase from January to February, according to the BLS.
Elevated housing costs were “by far the largest contributor” to higher consumer prices in March, forcing core inflation, which discounts more volatile food and energy prices, up by 5.6 percent in March from March 2022, according to the BLS. The BLS said housing’s increase “more than offset” the 3.5 percent drop in energy prices and helped keep inflation above the Federal Reserve’s 2 percent target.
The shelter index, which measures the cost of renting or home ownership, rose 0.6 percent from February to March after seeing a 0.8 percent increase between January and February. New Yorkers are feeling that as well with the average rent in Manhattan hitting a whopping $5,186 in February, a 6 percent increase from the same month last year, CBS reported.
While housing costs were “the dominant factor” in rising prices outside the food and energy sectors, the cost of motor vehicle insurance rose 1.2 percent while airline fares jumped 4 percent between February and March, according to the BLS.
Higher consumer prices come as the Fed has attempted to cool inflation by raising interest rates, sparking concerns that higher borrowing costs could push the U.S. into a recession.
The Fed raised its benchmark interest rate by a quarter of a percentage point in March in a smaller uptick than economists had forecasted, following the collapse of Silicon Valley Bank (SIVBQ) and Signature Bank (SBNY).
The smaller increase signaled that the Fed’s pattern of rate hikes could end soon, but with consumer prices still rising, the Fed may still raise interest rates again during its next meeting in May, Bloomberg reported. The labor market, too, has remained strong, adding 236,000 new jobs in March, though those gains slowed from the 311,000 new jobs added in February.
Celia Young can be reached at cyoung@commercialobserver.com.
