Has the surge in U.S. consumer prices accelerated further?

US inflation is expected to hit another 40-year high in March. The consumer price index, due on Thursday, is expected to rise 8.4 percent from a year earlier, the fastest pace since 1981, according to Bloomberg estimates.

Price growth rate from 7.9% in February, when the war in Ukraine had just begun.Commodities have since risen, with international oil benchmark Brent rising to Highest level since 2008. Although oil prices have retreated since that peak, they are still high, pushing up consumer prices.

A measure of consumer prices that excludes the volatile food and energy sectors, the so-called core CPI, is also expected to rise, but at a much slower pace. Core CPI rose 6.4% in February from a year earlier. The measure is expected to rise 6.6% in March, a four-year high, but would be the slowest year-over-year gain since last summer.

The gap between headline CPI and core CPI suggests a growing problem for the Fed. Inflation from supply chain bottlenecks or sanctions on Russia is not within the Fed’s direct control, but would still generate higher headline numbers. That could prompt calls for more aggressive policies.

“I think we can expect a growing gap between the title and the core [CPI]. The risk is that this makes the Fed need to surprise the market on the hawkish side to catch up with inflation risk,” said Jim Caron, a portfolio manager at Morgan Stanley. Kate Duguid

To what extent have higher energy prices pushed up inflation in the UK?

Like the US, the UK has faced record price growth in recent months.annual inflation rate reached 30-year high Energy prices rose 6.2% in February, ahead of Russia’s invasion of Ukraine.

Economists polled by Reuters expect consumer price growth to accelerate to an annualized 6.7 percent as stress across the economy becomes more prevalent in March data released on Wednesday. Many economists expect inflation to surge further to around 8% in April after energy regulators approved a higher price cap.

“Looking ahead, headline inflation is set to rise further, largely reflecting a sharp rise in international oil prices, a sharp correction in utility prices in April and October and, more generally, high commodity prices,” said Silvia Dall’Angelo, economist at Federated Hermes International.

Energy bill limits are expected to increase by a further 40% in October, which will add to inflationary pressures. The Office for Budget Responsibility, Britain’s financial watchdog, expects consumer price growth to peak at nearly 9% in the fourth quarter of this year, double previous forecasts and the highest inflation rate in about 40 years.

The OBR said the price spike was largely driven by higher energy costs, but “excessive demand from the domestic economy means we expect the bulk of these cost increases to be passed on to consumer prices and will be partly matched by nominal wage growth “. This could mean higher inflation for a longer period than currently expected. Valentina Romee

Will the ECB accelerate monetary tightening?

The European Central Bank Governing Council will meet in Frankfurt on Thursday and its members will be divided into two competing
The direction of monetary policy in the euro area.

More ‘hawkish’ officials see euro zone inflation soaring to record levels 7.5% in March That means they should speed up the ECB’s plan to end net bond purchases and raise interest rates quickly for the first time in more than a decade.

But opposition council members are hitting back, saying rate hikes will come at the worst of times for the euro zone economy, which is already facing a downturn because of the Ukraine war, especially if Russian gas supplies to Europe are suddenly cut off because of the conflict .

“The looming stagflation in the euro zone complicates life for the ECB,” said Carsten Brzeski, head of macro research at ING. “Higher inflation persists for longer and the growth outlook is very uncertain, not only in
Short-term but long-term will intensify ongoing debate between ECBs [policymakers]. “

Contrasting statements from ECB officials last week underscored the division of opinion at the top of the central bank. Bundesbank President Joachim Nagel said the spike in inflation “worries us all” and predicted that “savers may soon be able to expect higher interest rates again”.

A few hours ago, ECB executive board member Fabio Panetta said that most price pressures would come from energy markets and other factors beyond the central bank’s control, so it would “have to massively suppress domestic demand to reduce inflation”.

Analysts expect the ECB is likely to stick with its plan to end net bond purchases in the third quarter, saying it will retain the option of accelerating or slowing the exit from stimulus, depending on how the economy reacts in the months ahead. Martin Arnold