Americans paid more for gasoline, food, and other necessities last month, amid an ongoing wave of record inflation exacerbated by Russia’s invasion of Ukraine, according to US government data released Tuesday.
The consumer price index (CPI) rose 8.5% in the year to March, the highest increase since December 1981 and a sign of the pressure President Joe Biden’s administration is under even as it seeks new ways to punish Moscow for the attack on its neighbor.
Since last year, the inflationary surge has dragged Biden’s approval rating down, and the president has tried to blame it on Russian President Vladimir Putin and the disruptions to global energy markets caused by the invasion.
“Putin’s price hike in gasoline accounted for 70% of the increase in prices in March,” Biden claimed during a speech in Iowa, though the Labor Department said it was closer to half.
Prices began to rise last year as the economy recovered from the Covid-19 pandemic, and while the most recent report showed costs reaching new highs for many items, it also contained indications that the spike may be leveling off.
Prices rose 1.2% in March, in line with analysts’ expectations, but “core” prices, which exclude volatile food and energy sectors, rose 0.3%, less than expected.
“The Russia-Ukraine war has added fuel to the blazing rate of inflation through higher energy, food, and commodity prices that are turbo charged by a worsening in supply chain problems,” Oxford Economics’ Kathy Bostjancic said.
The strength of the ongoing price increases has bolstered the case for the Federal Reserve to take aggressive action at its policy meeting next month, likely raising the key lending rate by half a percentage point rather than the quarter-point increase last month.
“With labor shortages pressuring firms to raise wages, we are in the midst of a wage-price inflation cycle that will necessitate extreme Fed action to rid the economy of the spreading inflation threat,” said economist Joel Naroff, reports AFP.
A confluence of factors has fueled the inflationary surge, including businesses’ struggles to find enough workers and supplies, the Fed’s low-interest-rate policies, and congressionally approved stimulus measures that increased demand among American consumers.
In response, the White House has scrambled to provide relief, including releasing strategic oil supplies to lower pump prices and lifting a prohibition on selling a lower-priced gasoline blend during the summer months, which Biden promoted during his visit to Iowa.
The Fed, on the other hand, is the most powerful anti-inflation actor in Washington. Despite the fact that rate hikes are expected to lower prices in the coming months, central bank Governor Lael Brainard stated on Tuesday that the fallout from the Ukraine conflict “probably skews risks to the upside in inflation.”
A new pandemic lockdown in China “has the potential to lengthen some of those constraints that we’ve seen in supply chains,” Brainard said in a discussion following the release of the data.
According to Labor Department data, Americans are experiencing real financial hardship when it comes to purchasing must-have items. Prices for shelter, which includes rent, increased by 0.5%, while food prices increased by 1% overall.
According to the data, grocery prices were up 1.5% month over month and 10% year over year, the largest such increase since March 1981.
However, used car prices, which were among the first to rise last year, fell 3.8% last month, pushing core CPI lower. After seeing monthly increases of more than 1% in the latter months of 2021, new car prices rose by only 0.2%.