There is no doubt that U.S. inflation is cooling down. According to data, in March 2023, the annual inflation rate decreased to 5% for the ninth time in a row. As observed over the last couple of months, inflation dropped to 6% in February 2023 and now it has declined further down to 5%. The long-awaited figures for March have now been made public by the United States Bureau of Labor Statistics. The current rate is 0.2% below the market expectation.
It should be noted that the U.S. started 2023 with an inflation rate of 6.4%. The current rate is the lowest that inflation has been since May 2021.
Additionally, the food index climbed by 8.5% while the energy index declined by 6.4%. The Consumer Price Index [CPI] increased by 0.1% to 5.6% from the previous month. This was less than the 0.2% consensus. Furthermore, higher housing costs offset a 3.5% decrease in energy costs, and food costs remained constant.
Will inflation really rise to 12% by the end of 2023?
As observed, inflation has been on a steady decline in 2023. Despite this, several believed that inflation rates could surge by the end of 2023. More recently, the founder of Stormwall Advisors, Michael Wilkerson suggested that U.S. inflation could rise to a high of 12% by December 2023. However, considering the latest decline, the odds of such a drastic rise are decreasing at the moment.
Earlier today, the dollar registered a massive drop, when U.S. consumer prices increased less than expected in March. At the moment, it is looking less likely that the Federal Reserve will continue to hike interest rates. However, it is important to note that the Core CPI remains higher than the previous month at 5.6% YoY, which means inflationary pressure isn’t completely ousted. Hence, analysts are predicting that possibly one more hike is in play.