Consumer prices rise more than expected, pushed by 9.1% jump in gasoline

Consumer prices shot higher in March, given a boost both by a strong economic recovery and year-over-year comparisons to a time when the Covid-19 pandemic was about to throttle the U.S. economy, the Labor Department reported Tuesday.

The consumer price index rose 0.6% from the previous month but 2.6% from the same period a year ago.

The index was projected to rise 0.5% on a monthly basis and 2.5% from March 2020, according to Dow Jones estimates.

That big surge on a year-over-year basis came due to what economists call the “base effect” or the lower level used for comparison. In March 2020, the government had just begun a massive shutdown of U.S. businesses that ultimately would see more than 22 million Americans sent to the unemployment line.

While the inflation numbers look high, many economists as well as policymakers at the Federal Reserve expect the increase to be temporary. April likely also will show a sharp rise, but then the numbers are supposed to decrease as the worst months of the shutdown fall out of the data comparisons.

Fed officials have said they won’t adjust policy based on short-term jumps in inflation readings. Chairman Jerome Powell told “60 Minutes” in an interview aired Sunday evening that he does not expect any interest rate hikes this year.

Still, markets have been pricing in higher growth and inflation, with government bond yields rising to their highest levels since before the pandemic. The economic reopening coupled with unprecedented levels of public policy support are contributing to the inflationary environment.

Fed officials see growth this year around 6.5%, which would be the fastest increase since 1984.

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