US Inflation Falls to Lowest Level Since May 2021

US annual inflation based on the Consumer Price Index (CPI) dropped in March for the ninth consecutive month. Prices climbed just 5% for the 12 months ending in March, a drop from a reading of 6% in February.

Annual CPI slid to its lowest rate since May 2021. The decrease was helped by year-on-year comparisons equatingfavorably to food and energy prices that had spiked soon after Russia invaded Ukraine.

For the first time since September 2020, grocery prices dropped on a month-over-month basis. The food-at-home index dropped 0.3% for the month, aided by lower prices for eggs (which dropped 11%) and fruits and vegetables (which slid 1.3%). The broader food category was unchanged (0%) for the first time since November 2020.

However, there was still reason for concern as core CPI, less the often-volatile components of food and energy, grew 0.4% for the month, leading to a 5.6% annual growth rate. This led some analysts to contend that even though, on the surface, price pressures eased, core inflation was a worry that could point to more hikes to come in the interest rate.

Many analysts believe that even though there was some encouraging news in the inflation data, it was likely notenough to cause the Fed to pause hiking interest rates. Expectations continue for a quarter-point hike at the May meeting and even potentially another hike following that.

The future has been complicated by the collapse of two US banks in March, leading to turmoil that could mean future credit tightening, which in turn could dampen demand and even help the Fed in its inflation-fighting goals.