A Look At U.S. Consumer Prices

In March, consumer prices increased 0.3% over the month, but CPI inflation remained unchanged (at 2.8% y/y). It may increase in the coming months and thus exceed the central bank’s 2% target for price stability. However the government offered more flexibility to the BoE to pursue an accommodative policy until the economic situation has significantly improved.

Consumer prices rose in March by 0.3% over the month, but CPI inflation remained unchanged (at 2.8% y/y). According to the ONS, the largest upward pressure came from rises in recreation and culture (+1.8%) and transport insurance. By contrast downward pressures came principally from furniture and furnishings (+0.2%), motor fuels and meat. Core inflation also remained unchanged (at 2.3%).

New Metrics
Last month, ONS launched two new measures of consumer price inflation for the first time; CPIH, which includes owner occupiers’ housing costs and RPIJ, which is an improved variant of the Retail Prices Index (RPI) calculated using formulae that meet international standards. CPIH also remained unchanged in March (to 2.6%). It grew at a slower pace than CPI in line with a lower increase in owner occupiers’ housing costs than overall inflation for other consumer goods and services. RPIJ rose to 2.7%, up from 2.6% in February.

CPI inflation has remained roughly since October 2012 after having strongly fluctuated over the last years. Indeed it remained unchanged at 2.7% between October and January and has stood at 2.8% since then. But inflation, which has remained high since a few months, may increase in the coming months in line with the rise in university tuition fees and in energy prices, as well as the fall in sterling until recently. Inflation will thus remain well above the central bank’s 2% target, which remains the BoE’s primary target set by the government. However at the occasion of the 2013 budget statement of 20 March, the government offered more flexibility to the BoE to pursue an accommodative policy until the economic situation has significantly improved.

BY Catherine STEPHAN

To Read the Entire Report Please Click on the pdf File Below.