America’s prices surged in March

Wall Street has been a bundle of nerves about inflation since Democrats passed $1.9 trillion in economic stimulus. Tuesday, some of the first signs of those fears were proven to be true.

Consumer prices rose 2.6% last month, compared to March 2020. They were lifted in particular by surging energy prices, including gas. Excluding volatile gas and food prices, America’s consumer prices still rose 1.6% from the previous year, data from the Bureau of Labor Statistics revealed. That was more than economists surveyed by Refinitiv had predicted.

The question remains: Is this a temporary sugar rush from stimulus or the start of longer-term inflation that could eat into corporate profits? We don’t have those answers yet.

Last week, producer price inflation, which measures the change in sale prices for goods and services, also came in above expectations.

Prices are rising as the economy is gathering steam. The great reopening along with the continuing vaccine rollout are helping to release some of the pent-up consumer demand that built up over the course of the pandemic.

Even though higher inflation is a good sign for the economic recovery, investors worry that sudden price spikes will force the Federal Reserve to adjust its lose money policies sooner than hoped. And that would be bad news for the stock market.

The Fed has repeatedly said that inflation would need to run above its target of around 2% for a while, and that other factors, including a recovery of the labor market, were also key to changes in monetary policy.

This is a developing story. It will be updated.