Khaberni - Inflationary pressures in America are escalating again with sharp jumps in energy prices, placing policymakers before a difficult equation between curbing prices and supporting growth, amid fears of continuing global volatility.
The main inflation index in the United States rose in March, driven by an increase in gas prices, in the latest indication that the Iranian war is exacerbating the cost of living and delaying any potential cuts in interest rates by the Federal Reserve.
The US Department of Commerce reported on Thursday that the inflation index monitored by the Federal Reserve increased by 0.7% in March compared to February, marking a noticeable acceleration from the previous month. Annually, prices increased by 3.5%, the largest increase in nearly 3 years.
Excluding the volatile food and energy categories, core inflation rose by 0.3% in March compared to the previous month, and by 3.2% on an annual basis, exceeding the February reading of 3%, according to the Associated Press.
The rise in gas prices has moved inflation further away from the Federal Reserve's target of 2%. The chairman of the board, Jerome Powell, indicated during a press conference on Wednesday that the central bank might keep its policy unchanged for several months, pending the assessment of the implications of the Iranian war.
The Federal Reserve had kept the short-term key interest rate unchanged, after reducing it three times last year, as it typically keeps interest high or increases it to combat inflation.
According to the report, gasoline prices jumped by about 21% in March compared to the previous month, while food prices decreased by 0.1%. Clothing prices rose by 1% during the same month.
The average price of a gallon of gasoline nationwide was $4.22 on Thursday, according to the American Automobile Association (AAA), compared to $2.98 before the war broke out. Although the prices of American oil dropped slightly on Thursday morning, they are still above $105 per barrel, compared to about $67 before the war.
Nevertheless, the Federal Reserve focuses more on core inflation, as the extent to which rising energy costs transfer to this index in the coming months will be a crucial factor in upcoming monetary policy decisions.
Powell said: "We are fully aware that rising gasoline prices are burdening citizens across the country, which negatively affects the economy."
The report also showed a notable increase in consumer spending by 0.9% last month, driven mostly by price increases, but it also reflects continued moderate consumer spending even after accounting for inflation, indicating a degree of resilience.
In the same context, the US Department of Commerce announced that the economy grew at an annual rate of 2% during the first quarter of the year, compared to 0.5% in the last quarter of the previous year, which was negatively affected by a government shutdown that lasted 6 weeks.
