Despite consumer prices hitting a new four-decade high last month, the latest data show several signs that prices may be stabilizing, with economists now predicting that inflation may have peaked, though they warn prices will likely remain elevated into next year.
Inflation spiked higher last month, but may be close to normal.
Consumer prices rose 8.5% in the 12 months ending in March, but core inflation, which excludes volatile food and energy prices, rose 3%, slightly lower than expected and leading some Wall Street experts to predict that inflation may have finally peaked.
Lindsey Bell, Ally's chief markets, says inflation could be topping out as there were some green shoots in the data.
Consumer inflation likely peaked in March as the Russian invasion caused a sharp spike in food and energy costs, according to Nationwide senior economist Ben Ayers.
Beth Ann Bovino, chief U.S. economist for S&P Global Ratings, says this is likely near or at the top of the price gains.
Moody's Analytics chief economist, Mark Zandi, believes that inflation could be close to reaching a high point, though he says the next few months.
With food and shelter prices expected to keep rising, even with a small decline in the core reading last month, inflation could still surge higher.
Bill Adams says that inflation will weigh on consumer sentiment and consumer spending power.
The stock market rallied Tuesday morning despite the inflation report, with the Dow Jones Industrial Average rising as much as 300 points. The market gave up its earlier gains and turned negative later in the day as nervous investors braced for tighter monetary policy from the Federal Reserve.
The surge in prices last month was caused by rising food and energy prices. The Federal Reserve hiked interest rates for the first time in over a year in March, but still faces an uphill battle to combat inflation. Bank of America economists predict that the central bank will raise interest rates three times this year, and that food prices will remain high throughout the year.
Markets are ignoring the inflation number.
Inflation hit a 40-year high in March as Ukraine invaded.
The 10-year Treasury yield hit its highest level since January.
The Federal Reserve has a plan to shrink the balance sheet.
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