UNITED STATES — As expected, annual CPI growth ticked up to a 2.4 percent year-over-year rate in March from 2.2 percent in February as a large drop in telecommunication prices a year ago finally fell out of the annual calculation.
The headline rate is still being boosted in part by higher energy prices than a year ago.
Annual core CPI growth, though, bounced back to its highest level since February last year at 2.1 percent — and slightly above Federal Reserve policymakers’ 2 percent inflation objective.
Recent trends have been stronger than that. The six-month rolling average of month-over-month core CPI growth was 2.6 percent at an annualized rate in March by the Economics Department of RBC Financial Group’s calculation. That marks the third straight month at a 2 1/2 percent or greater pace. Month-over-month increases in the alternative core PCE deflator preferred by the Fed have also been running above the Fed’s 2 percent inflation objective over the half year to February.
There is still little evidence that inflation is coming unhinged on the upside. Further signs of firming, though, along with ongoing tightening in labor markets, add to the evidence that the economy is operating close to if not somewhat beyond long-run capacity constraints, reported RBC.
“That is fully consistent with the view that — barring some unexpected shock — interest rates will continue to grind higher to gradually withdraw still-accommodative monetary policy conditions,” said Nathan Janzen, senior economist, RBC.
For more economic research, visit the RBC website at http://www.rbc.com/economics.
SOURCE: RBC press release