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Inflation Cooled in March, but Stubborn Price Increases Remain

Inflation is slowing, as the latest reading of the Federal Reserve’s Preference Index showed, but costs continue to rise rapidly after weeding out volatile foods and fuels.

The personal consumption expenditure index rose 4.2% in the year to March from 5.1% in February.

But after removing food and fuel prices, the closely watched ‘core’ index remained largely stable last month. Did. The figures have been slightly revised upwards.

Data provide further evidence that inflation is easing, but the process remains volatile and could take a long time to fully unfold. ) over the past year, officials have sharply increased interest rates, raising borrowing costs and stifling demand, a move that has slowly seeped through the economy and weighed on inflation.

The central banks will meet on May 3 to make their next policy decisions. The official is widely expected to raise interest rates by a quarter of a percentage point to just over 5%. The market is focused on what it suggests for the future. The central bank predicted in March that it may stop raising interest rates after the next adjustment. Both incoming price and wage data and financial news can tell if they are comfortable with pausing.

The Fed should also consider disruptions in the banking sector as it considers its next move. A series of notable bank failures in March sent tremors through the system, and they continue. First Republic continues to struggle, and its stock has plunged this week. Industry problems can delay lending to consumers and businesses, weighing on the economy.

Consumption is already cooling. After an inflation-adjusted fall of 0.2% in February, consumer spending was flat in March compared with the previous month, according to a report on Friday.

As growth slows and banking problems further weigh on consumers, businesses will be unable in the coming months to charge more for goods and services without scaring their customers. There is a possibility. But so far, many companies have retained the ability to raise prices.

“If we see enough inflation that we need to raise the price, we will take it,” said Brian Nicholl, chief executive of burrito chain Chipotle. Announcement of financial results this week. “I think we have now proven that we have pricing power.”

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