Both headline and core inflation are heading in the right direction. But the Fed shouldn’t overcorrect after a single month of falling prices.
by Alexander W. Salter
The Daily Economy
After a quarter-long inflationary resurgence, it looks like prices are now falling. The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) declined 0.1 percent in March. Prices rose 2.4 percent year-over-year, compared with 2.8 percent last month. The biggest decrease was for energy, which fell 2.4 percent. Gasoline prices were down 6.3 percent.
Excluding volatile energy and food prices, inflation stayed in positive territory. Core CPI rose 0.1 percent in March (2.8 percent year-over-year). But this is lower than February’s 0.2 percent monthly increase.
This is good news. Both headline and core inflation are heading in the right direction. But the Federal Reserve’s job might not get easier. Fed Chair Jerome Powell recently noted that Trump’s tariffs may complicate the Fed’s task by pushing up prices. This would be a one-time price increase rather than sustained inflation. Yet it might compel monetary policymakers to respond anyway.