Owing to rising gas prices and housing costs, consumer prices in the United States has increased for the second consecutive month in March. This is a sign of a slight degree of inflation means that the Federal Reserve should be increasing interest rates in the short term.
The decline in energy prices has almost come to an end, although the effects can still be felt in this moment. The Central Bank of the United States believes that one of these effects is that inflation would only reach up to 2 percent. The increase in consumer prices in March showed to be less plausible.
The economist chief executive of RBS in Stamford, CT, said the data gathered earlier this year has yet to reassure the Federal Reserve that the inflation target of two per cent can still be achieved.
An increase of 0.2 percent of the Consumer Price Index in February and March was observed. The CPI stood at 0.1 percent during the past 12 months from March. This IPC was considered the core CPI which ensured the costs of food and energy costs. The core CPI rose from 1.8 per cent in February, which is the highest since October.
Gasoline prices rose 3.9 percent, which is the highest since February 2013. Last month, food prices fell 0.2 percent. Economics professor Justine Wolfers said oil prices last year were still quite high and will not be achieved by oil prices today when increase.
Housing costs have increased by 0.3 percent. The rise in the CPI in March is explained by the increased cost shelter as well as energy prices. That housing costs to rise further in the coming months is expected.
Since December 2008, the Federal Reserve has been able to keep interest rates near zero one day. Officials have said the increase is expected after the monetary policy meeting this June. Economists believe that the tightening of monetary policy will not happen anytime before September. This is based on economic data recently collected including nonfarm payrolls.
The University of Michigan reports that the economy has recovered to experience a low level of consumer confidence. The report showed that the numbers of 93.0 in March to 95.9 this month. This means that the economy is still in a good position. Consumer spending continues to be on the safe side despite facing some difficulties during the start of the year due to the harsh winter, the unstable dollar and slowing world growth. Labour disputes West Coast ports also affected the economy and consumer spending.
Inflation still be controlled by the strengthening dollar. The dollar has gained 13 percent against trading partners of the United States since June last year.
Effect of the dollar could lead to cut down to half the inflation trajectory. This influence can easily be dampened if wages were allowed to increase.