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■ US headline CPI inflation further accelerated in March, rising to 8.5% yoy from 7.9% yoy in the prior month. This is the
highest rate of inflation since 1981 (chart 1). Despite the high degree of uncertainty, we judge inflation is likely at or very
close to the peak, as base effects turn negative and gasoline prices have stabilized. On a monthly basis, the CPI index was
up 1.2% mom after a rise of 0.8% mom in February.
■ As a result of an almost full reopening of the economy, persistent supply bottlenecks and hot housing and labor markets,
core CPI inflation increased further last month, rising to 6.5% yoy from 6.4% yoy, whereas on a monthly basis it decelerated
to 0.3% mom from 0.5%. We expect core CPI to peak in yoy terms in the next month or so, with base effects driving it down
as well as an easing in monthly core inflation rates.
■ The largest contributions to monthly inflation were from energy, shelter and food. Gasoline prices alone added more than
half (0.7pp) of the monthly rise in CPI, driven by the spike in oil prices that was triggered by the Russia-Ukraine conflict.
Partly thanks to some relief measures adopted by the Biden administration over the last few weeks, including the release of
strategic petroleum reserves, gasoline prices have come down somewhat this month and this will bode well for the April
reading (chart 2).
When it comes to rents, which rose another strong 0.4% mom in March, they will likely continue to
contribute significantly to CPI inflation in the coming months (chart 3). As we pointed out in an Economics Flash about
surging house prices in the US, the shelter component of the CPI reacts with a lag to changes in market prices (both rents
and house values) both for technical reasons (the way the subindex is constructed) and practical reasons (renters will only
encounter higher prices when it comes to moving or renewing their leases).
