April 15, 2019 — March CPI Beats Expectations


The Labor Department announced US consumer prices rose the most in 14-months, advancing 0.4 percent as a result of increases in the costs of food, gasoline and rents.  It was the biggest rise since January 2018, and doubled February’s gain of 0.2 percent.  However, underlying inflation remains low as the domestic and world economies slow.

In the last 12 months, CPI increased 1.9 percent.  The CPI gained 1.5 percent in February which is the smallest rise since September 2016.  The Fed targets 2 percent inflation, but uses the core personal consumption expenditures (PCE) index for decision making.  The February and March PCE data will be released April 29.  The February data has been delayed due to the partial government shut down at the beginning of the year.

Lackluster inflation and moderating economic activity support the Fed’s decision last month to put its three-year campaign to raise interest rates on hold. The US central bank dropped projections for any rate hikes this year after lifting borrowing costs four times in 2018.  However, as the yield curve remains inverted, you can lock in long-term swap rates at levels below LIBOR if you act now.