Inflation concerns linger, point to Fed interest hike this week

Key measures of prices and wages remained high in March, keeping the Federal Reserve on track to raise interest rates this week for the 10th time since March 2022 in its drive to defeat high inflation, the Associated Press reports. If the Fed raises its benchmark rate by a quarter-point, it would reach 5.1%, the highest level in 17 years. 

An index that is closely followed by the Fed, which excludes volatile food and energy costs to capture “core” inflation, rose 0.3% from February to March and 4.6% from a year earlier.   

Paychecks grew 5.1% in the first quarter compared with a year ago, before adjusting for inflation, the Labor Department said, unchanged from three months earlier. The Fed regards wage increases above roughly 3.5% as too high for it to reach its 2% inflation target.  

Friday’s data did include some encouraging signs regarding inflation. Overall prices ticked up just 0.1% from February to March, and compared with a year ago, inflation slowed to just 4.2%. That is the lowest year-over-year overall inflation figure in nearly two years. 

Additionally, some chronic drivers of inflation moderated last month. Rental costs grew 0.5% in March, down from 0.8% in February. Real-time data show rental costs declining as more apartments have been built, suggesting that housing price growth should continue to slow.  

Many other services costs that the Fed are closely monitoring, however, remained high. Restaurant prices rose 0.6% last month, hotel costs soared 3.1%, and child care costs jumped 1.4%.