US inflation rises more than expected in March

Due to rising gas and rental housing costs, US consumer prices rose more than anticipated in March. This led financial markets to predict that the Federal Reserve would postpone interest rate cuts until September.

According to the Labour Department, the increase in the consumer price index that occurred in February continued in March, rising by 0.4 per cent. Economists had predicted that consumer prices would rise by 0.3 per cent.

The monthly increase in the index was primarily driven by a 0.5 per cent increase in shelter prices and a 1.7 per cent increase in gasoline prices. Core consumer prices, which exclude food and energy prices, increased by 0.4 per cent for the third consecutive month, exceeding expectations of a 0.3 per cent increase.

“Today’s report shows inflation has fallen more than 60 per cent from its peak, but we have more to do to lower costs for hardworking families. Prices are still too high for housing and groceries, even as prices for key household items like milk and eggs are lower than a year ago,” US President Joe Biden said in a statement.

Meanwhile, UK retail sales growth picks up as price pressures ease. Industry data indicates that growth in UK retail sales rose in March after falling to a two-year low in February, suggesting a recovery for the sector as a result of easing price pressures.

After a 1.1 per cent increase in February, total retail sale increased by 3.5 per cent on a yearly basis in March. Sales were up by 5.1 per cent over the same period in the previous year. For the first time in over two years, retail sales growth outpaced headline inflation. In the three months leading up to March, food sales rose by 6.8 per cent, while non-food sales decreased by 1.9 per cent.

Consumers now have more purchasing power as a result of lower inflation, economists and industry experts pointed out. The official rate of consumer price inflation decreased to 3.4 per cent in February, reaching its lowest level since 2021, reducing the costof-living pressures that had been negatively impacting retail sales.

Finally, Chinese inflation data disappoints again. In March, China’s consumer prices increased little compared to a year earlier. This defied analysts’ expectations and highlighted the challenges for the world’s secondlargest economy as it attempts to stimulate domestic demand.

China consumer inflation slowed more than expected in March to 0.1 per cent compared to the previous month reading of 0.7 per cent. The low CPI reading highlights Beijing’s need to accelerate interest rate cuts, Larry Hu, chief China economist at Macquarie Capital added, noting that doing so could help households with their mortgage payments and free up more money for spending.

This article does not constitute legal and/or financial advice and is being issued for information purposes only by Bank of Valletta plc, 58, Zachary Street, Valletta. Bank of Valletta is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment Services Act (Cap. 370 of the Laws of Malta).