Upcoming CPI report 'will not be pretty,' analyst says

When it rains, it pours, and new data is projected to show that high levels of inflation have continued to deluge consumers for a third consecutive month in 2022.

March’s Consumer Price Index (CPI) report, which will be released Tuesday morning, will give the public a look at how prices have responded to volatility amid geopolitical pressures as well as new developments in Federal Reserve monetary policy.

Analysts and economists alike are pessimistic that March’s report will not be much better than February’s report, which revealed decades-high inflation from a year ago.

“The upcoming Consumer Price Index for March will not be pretty,” Greg McBride, senior vice president and chief financial analyst at Bankrate.com, told Yahoo Finance in an email. ”Inflation has continued to accelerate in recent months, and with the higher gasoline and food prices stemming from the war in Ukraine, the worst is likely still to come.”

A fire is seen at an oil refinery following a missile attack near the port city of Odesa, amid the ongoing Russia's invasion, in Ukraine, April 3, 2022. REUTERS/Nacho Doce
A fire is seen at an oil refinery following a missile attack near the port city of Odesa, amid the ongoing Russia's invasion, in Ukraine, April 3, 2022. REUTERS/Nacho Doce

Estimates support an increase in inflation at a rate greater than last month. While February recorded an average increase in prices of 7.9%, driven mostly by higher energy prices, March is expected to show somewhere around 8.5%, according to UBS economists’ estimates.

Consumer sentiment hit an 11-year low in March 2022 as wage increases failed to keep up with nearly across-the-board price increases. This represented the third consecutive month in which a decline in consumer sentiment was recorded, according to data from the University of Michigan.

“Robust pay increases have been no match for the higher costs households are facing on rent, food, electricity, gasoline, and a pervasive list of both goods and services,” McBride explained. “The buying power of Americans is being squeezed more and more each day, and you see this reality reflected in the dour consumer sentiment readings.”

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As prices continue to rise, the Federal Reserve is under mounting pressure to more aggressively pursue hawkish monetary policy. The central bank announced earlier last month that they would begin raising interest rates by half a percentage point with more hikes likely to come later in the year.

“[M]y main message today is that, as the outlook evolves, we will adjust policy as needed in order to ensure a return to price stability with a strong job market,” Fed Chairman Jerome Powell told the public in a speech last month.

With the labor market currently posting some of its best numbers in recent memory, the Fed appears to be more inclined to focus on the second half of its dual mandate of maximum employment and stable prices for the foreseeable future.

“With prices increasing everywhere you look and both consumers and businesses bracing for more, it is time for the Federal Reserve to take the gloves off,” McBride continued. “The Fed is now much more inclined to boost interest rates by one-half percentage point at their meeting in May, and very possibly beyond.”

Ihsaan Fanusie is a writer at Yahoo Finance. Follow him on Twitter @IFanusie.

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