Higher energy prices push up US inflation

The US inflation rate, based on the Consumer Price Index for all urban consumers (CPI-U), increased by 0.9% in March, higher than the 0.3% growth noted in February, according to the US Bureau of Labor Statistics (BLS).

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Brent’s price has come under mild pressure following firm inflation data, as it dampens expectations of further interest rate cuts by the US Federal Reserve (Fed) this year.

Higher interest rates in the US can weigh on demand growth and make dollar-denominated commodities like oil more expensive for holders of other currencies.

The latest data follows the outbreak of a major Middle East conflict that began on 28 February, when the US and Israel launched coordinated strikes on Iran.

“March CPI reflects the transition from pre [Middle East] shock calm to post shock reality, with energy driving the surge,” SPI Asset Management managing partner Stephen Innes wrote.

On an annual basis, the US CPI advanced 3.3% last month – much higher than the 2.4% growth seen in February. Notably, the US central bank remains focused on bringing inflation down to its 2% target.

“This is not just another CPI print. It is the first real test of how the energy shock feeds into the macro narrative. The market has been trading the war, now it trades the consequences,” Innes added.

By Aparupa Mazumder

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