Beating inflation is starting to feel a lot like losing weight, at least before the Ozempic era: Losing the first pounds is generally easier — it’s getting rid of the last ones that’s proving hard.
Data released on Wednesday showed consumer prices moving in the wrong direction once again, rising 3.5% in March from a year earlier, a little hotter than the 3.4% rise economists had predicted.
That also marked a slight pick-up from the 3.2% annual gain seen in February.
Inflation at these levels is still significantly better than it was two years ago, when it peaked at a decades-high of 9.1%.
But inflation is proving to be very stubborn. Although the Federal Reserve has managed to get inflation down significantly from two years ago, it’s finding it exceedingly hard to push it below that 3% level.
That matters. That’s because a rise of consumer prices above 3%, as it has been through this year, still feels high for many people across the country.
And for the Fed it poses a dilemma: Policymakers have made clear they want to see inflation moving more consistently towards its 2% target before it starts cutting interest rates.
It’s hard to say when that will happen. Though there are promising signs, they are not conclusive yet.
Fed Chair Jerome Powell this month acknowledged that inflation appeared to be on a “sometimes bumpy path,” and was resolute in holding firm on interest rates for now.
“We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2%,” Fed Chair Jerome Powell said in a speech this month at Stanford University.
There are several factors contributing to keep annual inflation above 3% — and they shouldn’t be particularly surprising to anyone.
Rising rents were a big contributor to inflation last month. Car insurance costs also contributed to higher inflation.
And lately, another factor is threatening to push up inflation: gas prices. That’s because oil prices have been rallying recently because of a number of factors including worsening geopolitics in the Middle East and supply concerns.
