Relief for US households and companies as inflation slows again

Inflation in the US slowed again last month as the Federal Reserve’s interest rate increases helped to ease price pressures on households and businesses.

Data released by the Labour Department on Wednesday showed that the Consumer Price Index rose by 0.1 per cent in March, down from a 0.4 per cent increase in February. Inflation slowed to 5 per cent on an annual basis.

March was the ninth straight month that inflation fell in the US, after peaking at 9.1 per cent in June.

A Bloomberg survey of economists had estimated inflation would rise by 0.2 per cent on a monthly basis and by 5.2 per cent annually.

Core inflation – which excludes food and energy – rose by 0.4 per cent last month and by 5.6 per cent on an annual basis, as expected.

Still, inflation is running well above the Fed’s 2 per cent target and the labour market remains tight, with employers adding 236,000 jobs last month. It adds further pressure on policymakers who have acted aggressively against rising prices.

Last month’s Personal Consumption Expenditures Price Index also showed encouraging signs that inflation was cooling.

The Fed raised interest rates nine times since March last year – from a near-zero rate to the current target range of 4.75 per cent to 5 per cent. In its latest 25-basis point increase last month, it omitted the ominous words “ongoing increases”, signalling it could soon pause rate rises.

Wednesday’s data “has now confirmed that the Fed doesn’t need to work as hard as they have, and the time has come to ease off on increasing the interest rate”, said Naeem Aslam, chief investment officer at Zaye Capital Markets.