The numbers: The Federal Reserve’s preferred measure of inflation rose a sharp 0.9% in March, but the increase largely stemmed from a surge in the cost of gas and there were some signs that intense price pressures could be starting to ease.
Over the past 12 months, the so-called personal consumption price index has climbed 6.6%, up from 6.4% in February, the government said Friday. That’s the steepest increase since 1981.
Yet a narrower measure of inflation that omits volatile food and energy costs, known as the core PCE, rose by just 0.3% in March for the second month in a row. That matched the Wall Street forecast.
The increase in the core rate of inflation in the past year also slipped to a 5.2% from 5.3%, marking the first month-to-month decline in more than a year.
The Fed views the PCE index — the core rate in particular — as the most accurate measure of U.S. inflation. It’s more comprehensive and takes into account when consumers substitute cheaper goods for more expensive ones — say ground beef for filet mignon or frozen spinach for fresh.
Big picture: The highest inflation since the early 1980s is putting more financial pressure on households and businesses and shaking up Washington.
The Fed is moving to raise interest rates rapidly to try to cool off inflation, but economists say it will take time.
Prices have soared partly because of ongoing pandemic-related shortages of key supplies such as computer chips. The Fed’s easy-money strategy and massive government stimulus after the viral outbreak also contributed.
Rising inflation is spurring workers to ask for higher pay and businesses to charge higher prices, potentially making it harder for the Fed to reverse the tide.