Inflation rose to a 6.6% annual rate in March in the personal consumption expenditures price index, the metric favored by the Federal Reserve, the Bureau of Economic Analysis reported Friday.
That is 0.3 percentage points higher than in the previous month and the fastest pace of inflation since January 1982.
The report is evidence that inflation is still accelerating, unwelcome news both for families stretched to afford basics and for President Joe Biden, whose popularity has been greatly damaged by the rising prices.
Friday’s report will not lessen the urgency within the Fed to tighten monetary policy in an attempt to regain control of inflation. Already, the Fed was expected to take the historically aggressive step next week of raising its target rate by half a percentage point in an effort to slow spending and lower price pressure.
ANXIOUS FED SET FOR HISTORIC MEASURE TO TRY TO CURB INFLATION
“With inflation clearly in focus for policymakers, these data do not impact the Fed’s rate hike plans next week,” Rubeela Farooqi, chief U.S. economist for High Frequency Economics, wrote in a note following the release.
Still, the report did contain a silver lining, namely that “core inflation” — that is, a measure of inflation that strips out the volatile categories of food and energy — cooled off by a tenth of a percentage point to 5.2%. Nevertheless, core inflation remains higher than at any time since the Great Inflation that ended in the early 1980s.
Energy prices have soared by a third over the past year, the report showed, exacerbated by the supply disruptions caused by Russia’s invasion of Ukraine. Higher gas prices, in particular, have soured the public on Biden’s economic management.
The personal consumption expenditures price index is separate from the more widely watched consumer price index, which measured inflation at 8.5%.
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Fed officials favor the personal consumption expenditures price index because it takes a more comprehensive set of prices into consideration and better accounts for household substitutions between goods and services that differ in price. The central bank has a target of 2% annual inflation. Inflation has now been above that target for a full year.
