WASHINGTON – U.S. consumer prices rose a modest 0.1 per cent in March as a drop in grocery prices offset higher energy costs.
Excluding volatile food and energy prices, core consumer inflation also increased 0.1 per cent, the smallest gain since August, the Labor Department reported Thursday.
Over the past year, overall consumer prices are up just 0.9 per cent and core inflation 2.2 per cent.
In December, the Fed raised the short-term rate it controls for the first time since 2006. The central bank was widely expected to raise rates several more times this year. But policymakers have proven reluctant to move quickly, given tame inflation rates and signs of weakness in the U.S. and world economies.
“The conclusion is a simple one: there’s no urgency for rate hikes if there’s no inflation,” said Guy LeBas, fixed income strategist at Janney Montgomery Scott, in a note to clients.
Grocery prices fell 0.5 per cent in March, with cereal prices down 1.1 per cent, the steepest slide since February 2006. Clothing prices dropped 1.1 per cent, the most since September 1998. Men’s clothing prices fell by a record 2.5 per cent.
Energy prices climbed 0.9 per cent, with gasoline prices surging 2.2 per cent.
The U.S. economy slowed at the end of 2015, growing at a lacklustre 1.4 per cent annual rate from October through December. Many economists believe it decelerated further in the first quarter to an annual growth rate of around 1 per cent.