U.S. consumer inflation accelerated from 7.9 percent y/y in February to 8.5 percent in March. It was slightly faster than forecasts and also the highest since December 1981.
On an m/m basis, U.S. consumer inflation reached 1.2 percent in March, after hitting 0.8 percent in February, its most significant monthly increase since September 2005, when Hurricane Katrina devastated New Orleans. Among the major categories of goods and services, the strongest y/y increases were in diesel fuel (up by 70.1 percent), gasoline (48 percent) and used cars (35.3 percent). Food prices increased by 8.8 percent. Core inflation, which excludes energy, fuel and food prices, accelerated from 6.4 percent in February to 6.5 percent in March.
Investors had already been upbeat that the inflation reading for March would be high. Even the White House warned that it would be "unusually elevated." So the markets' first reactions to it were quite moderate. While in the morning, the yield on U.S. 10-year bonds reached 2.83 percent, in the afternoon it fell almost to 2.75 percent. It rebounded slightly after the release of the data on price increases.
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