U.S. Inflation Mild as Gas Prices Rise More Slowly

US inflation mild as gas prices rise more slowlyWASHINGTON (AP) - Gas prices rose more slowly in March, keeping overall U.S. inflation mild.

The consumer price index rose 0.3 percent in March, the Labor Department said Friday. That's slower than February's 0.4 percent rise.

Excluding food and gas, so-called "core" prices increased 0.2 percent in March.

Inflation has eased since last fall and is expected to stay tame. In 12 months that ended in March, prices rose 2.7 percent. That's below last year's peak year-over-year rate of 3.9 percent.

Core prices have risen 2.3 percent in the past 12 months, close to the Federal Reserve's inflation target of 2 percent.

Prices are "benign and likely to stay that way for some time yet," said Ian Shepherdson, an economist at High Frequency Economics.

Mild price increases leave consumers with more money to spend, which boosts economic growth. Lower inflation also gives the Fed more leeway to keep interest rates low.

Gas prices are high but have started to level off. In March, they gained 1.7 percent, slower than the 6 percent increase in February.

And in the past week, the national average price per gallon fell 4 cents, to $3.90 on Friday.

Despite more hiring, unemployment is still high and few workers are getting pay raises. So many retailers can't charge more without risking the loss of some business.

Food prices ticked up last month but are moderating after sharp increases last year.

The cost of meat, poultry and some fruits rose. Chicken prices jumped by the most in four years. The price of used cars and trucks also increased and rents rose, driving up core prices. Americans also paid more for medical care, clothing and airline fares.

A small amount of inflation can be good for the economy. It encourages businesses and consumers to spend and invest money sooner rather than later, before inflation erodes its value.

Still, few workers are receiving pay raises, which makes even a small amount of inflation challenging for most Americans. Average hourly wages, adjusted for inflation, fell for the third month in a row, the department said Friday.

Fed chairman Ben Bernanke has acknowledged that rising gas prices have boosted inflation. But he has maintained that the increases are likely temporary.

Most economists expect the Fed won't announce any new policy initiatives at its April 24-25 meeting. Policymakers appear less inclined to take further steps to boost growth. Minutes from their March 13 meeting showed only a couple members expressed support for purchasing more bonds as a way to drive down long-term interest rates and promote more borrowing and spending.

A report Thursday indicated that inflation pressures aren't increasing much at the wholesale level. The producer price index, which measures price changes before they reach the consumer, was unchanged in March. Rising costs for food and pickup trucks were offset by a drop in wholesale gas prices.

In the past 12 months, wholesale prices rose 2.8 percent, the smallest year-over-year rise since June 2010. Excluding food and gas, core wholesale prices rose 0.3 percent and 2.9 percent in the past year.

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bggdg

With the upper end of the Fed's stated inflation goal at 2%, how can a 2.7% annual rate be considered "tame"? If the speed limit on your residential street is 30 mph, would residents consider a motorist barrelling through town at 40 mph to be driving at a modest speed?

Further, what evidence is there that even this elevated level of inflation is unlikely to increase? With loose monetary policy and housing costs accelerating (based on "owners equivalent rent, used by the BLS in the housing component of the CPI calculation), it’s hard to see inflation getting back down to the Fed’s 2% target anytime soon. Quite the contrary, these factors suggest the inflation rate is nearly certain to move higher later in the year.

April 15 2012 at 4:37 PM Report abuse +1 rate up rate down Reply
capenv

If we all use a little less gas a week there qwill soon be a gasolinwe glut and the prices will have to fall, supply and demand. Think before you drive, consolidate your errands into one trip.

April 13 2012 at 9:27 PM Report abuse rate up rate down Reply
capenv

We're paying 4.78 a gallon of reg at the BP in downtown Chicago, the Muslim Clowns home town.

April 13 2012 at 9:25 PM Report abuse +1 rate up rate down Reply
.kowalski440mag

Oooooooooh my......I feel so much better knowing I'm not making oil people as rich as fast as I was in Jan. and Feb.

April 13 2012 at 4:03 PM Report abuse +1 rate up rate down Reply