Updated: 16-Apr-08 11:03 ET

March CPI

Updated: 16-Apr-08 11:03 ET

Highlights

• March consumer prices 0.3% (4.0% yoy), 0.2% core (2.4% yoy).

Key Factors

The as expected gain leaves unchanged annual growth of 4.0%.   Twice the size of the annual gain in August before energy prices surged.
• Energy prices provided a 1.9% lift as the core component came in as expected at 0.2%.
• Annual core growth edged back to 2.4% annual growth.  Reached a low of 2.1% yoy in Aug/Sept before rising to 2.5% yoy in January.
• Core commodity prices are flat from a year ago, energy (17% yoy) as services (3.3% yoy) provide the core pressure.

Big Picture

• The core rate of consumer inflation reached a decade high of 2.9% yoy in September 2006, eased off to 2.1% and has climbed back to 2.4% yoy in March.  The stickier prices for medical care and tuition will continue to hold firm as yoy core commodity prices are flat from a year ago despite the pressure down the producer pipeline.  Energy prices provide the monthly swing and the largest underlying pressure.  In the big picture its aggregate demand which provides the price direction as sub-potential growth (below 3%) will ease the core inflation pressures over time.  The Fed more closely watches core PCE prices as an inflation guide which stands at 2.0% yoy -- at the low end of 2008 Fed expectations and the high end of the Fed's 1%-2% 'comfort zone'.  Overall CPI reached a 14 year high of 4.7% yoy in Sept '05 as energy prices have provided the recent lift to the current 4.0% yoy.