Rising food and energy prices lead to an increase in inflation

DNHN - Consumer prices are expected to rise to their highest level since December 1981 in March because of higher food prices, rising rents, and rising energy prices.

According to Dow Jones, the consumer price index (CPI) is due today (April 12), and experts anticipate a monthly rise of 1.1 per cent and an annual increase of 8.4 per cent. 

In February, the economy grew by 0.8 per cent, or 7.9 per cent year on year, the most since early 1982. Moody's Analytics' top economist, Mark Zandi, stated: “Things are only going to get worse from here”.

The crisis between Russia and Ukraine, increasing oil costs, China's real lockdowns, interruptions to supply chains, employment shortages, and a slew of other factors have all contributed to excessive inflation. We are dealing with worldwide supply disruptions.

It is difficult to prevent significant inflation. According to the forecast, core inflation, which excludes food and energy, is predicted to rise further, similar to February, with a year-on-year gain of 6.6 per cent, up from 6.4 per cent.

Dow Jones & Company.

The good news is that it seems that this will be the peak due to oil prices, said Diane Swonk, Grant Thornton's senior economist.

Oil prices increased quickly after Russia invaded Ukraine in late February, hitting a high of $130.50 per barrel for West Texas Intermediate oil, a commodity regarded as a benchmark in oil prices, at the start of March.

On Monday, the price decreased to roughly $94 per barrel (April 11)."The Fed worries that inflation is shifting from commodities to services, and used vehicle prices are going to increase again," Diane Swonk, chief economist at Grant Thornton said.

“Supply chain issues aren't going away. They are deteriorating”.

Based on fundamentals alone, experts believe inflation will peak this month or next. The CPI, according to Zandi, will fall to 4.9 per cent by the end of the year. There is a good chance that the Federal Reserve will tighten its policy very hard to stop the fastest inflation rate in four decades.

According to Tom Simons, money market economist at Jefferies, the Fed is projected to hike rates by 50 basis points at its May 3 meeting, and "CPI shouldn't alter that. “According to Simons, energy costs in the CPI are likely to jump 18% in March.”

 “The first half of March was particularly harsh after the Russian invasion. Food costs are a similar but not identical scenario. Housing will once again be a significant concern," he predicted. He anticipates that rentals, or the cost of a house in terms of CPI, will rise by around 0.5 per cent, with rents rising by 0.6 per cent month on month.

Bao Bao