U.S. consumer inflation accelerates in March

U.S. consumer prices rose in March. Sequentially, the headline inflation rose 0.4 percent, driven by a 3.5 percent rise in energy prices. The inflation rise was consistent with market expectations. The jump lifted headline inflation to 1.9 percent on a year-on-year basis, an acceleration from February’s 1.5 percent.

For the core prices, it was another soft month. Stripping food and energy, CPI rose a bit by 0.1 percent, matching February’s modest gain. Core inflation rose 2 percent year-on-year, a continued slowdown from 2.3 percent to 2.4 percent recorded in mid-2018.

Core inflation was held back by a 1.9 percent fall in apparel prices in the month – the biggest one-month fall in 70 years. Prices also dropped for used cars and trucks, airline fares, communications and motor vehicle insurance. Prices for shelter continued to rise, as did medical care, new vehicles and education. Several of these hotter categories are services, and core services inflation accelerated 0.3 percent in March, following a string of 0.2 percent readings. Core services inflation was stable at 2.7 percent on a year-on-year basis in March.

On the contrary, core goods inflation was non-existent in March, flat on a year-on-year basis. That might not sound too impressive, but food prices were in deflationary territory two years ago, and 2.1 percent is the most rapid pace in four years.

“Another soft reading for core inflation signals a lack of inflationary pressures in the U.S. economy so far in 2019. On the other hand, a pick-up in core services inflation in March puts a halt to the worrying deceleration in price pressures on the services side. And, the likely temporary nature of the drop in apparel prices mutes the impact of the soft core reading somewhat”, said TD Economics.

In all, the March inflation data is another month of goldilocks inflation. Not too hot that the Fed requires to re-evaluate its pause, and not so cold that it requires to consider easing policy.

At 16:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -114.344 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex