Inflation jumps to 3.3% in March as energy leads CPI surge

Inflation hit its highest rate in nearly two years, according to data released Friday by the U.S. Bureau of Labor Statistics (BLS).

According to the Consumer Price Index (CPI) the inflation index for all items jumped 3.3% in March, up from the 2.4% annual increase recorded in February. Month over month, the all-items index rose 0.9% in March, up from a 0.3% increase a month prior. This is the largest monthly increase in nearly four years. 

The biggest contributor to the all-items index’s monthly increase was the energy index, which rose 10.9% in March, led by a 21.2% increase in the index for gasoline. According to the release, the gasoline index’s increase accounted for roughly 75% of the all-items index’s monthly increase.

The index for shelter also rose month over month in March, jumping 0.3%, as the owners’ equivalent rent also rose 0.3%. The index for food, however, remained unchanged. 

Due to this, the index for all items, less food and energy (aka core inflation), rose 0.2% from the month prior in March.

On an annual basis, the core items index was up 2.6%, up slightly from the 2.5% increase reported in February, as the index for energy was up 12.5% year over year in March and the food index was up 2.7% annually. The index for gasoline reported an 18.9% annual increase in March. Year over year, the shelter index rose 3%, with the owner’s equivalent of rent rising 3.1% annually. 

According to economists, the March inflation data combined with the resilience shown by the labor market in the March jobs report effectively removes the possibility of a Federal Reserve rate cut in the near future. Additionally, falling consumer sentiment and rising mortgage rates are expecting to impact the spring homebuying season.

“Higher inflation has impacted the housing market in a couple of ways. Mortgage rates, which fell briefly below 6% in February, rose for five weeks in a row before declining slightly this week. Higher rates erode buyers’ purchasing power and stall progress toward greater affordability,” Lisa Sturtevant, chief economist at Bright MLS, said in a statement.

“The spring housing market is currently caught in a crosscurrent of conflicting signals. Although inventory is rising seasonally, a tug-of-war has emerged between increased choice and decreased confidence. Both buyers and sellers are acting with extreme caution, waiting for lower rates, more stable inflation and more certainty.”