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The Fed: Fed’s Brainard welcomes signs of moderation in March ‘core’ consumer inflation

The moderation in some measures of U.S. inflation was welcome in March but it would be a good idea to see if the decline continued in coming months before reading too much into it, said Federal Reserve Governor Lael Brainard on Tuesday.

Brainard said that “core” inflationary pressure moderated in March by more than she had expected.

The Fed views “core” inflation readings, which exclude food and energy prices, as a better guide to future inflation than the overall headline data.

In March, core CPI rose 0.3%, down from an 0.5% reading in the prior month. this is the smallest gain in six months. Over the past year, core inflation is running at a 6.5% rate.

In an interview at the Wall Street Journal’s Job Summit, Brainard noted that prices of core goods have been responsible for almost half of the increase in core inflation over the past year.

“So its very welcome to see the moderation in this category, and I’ll be looking to see whether we continue to see some moderation in the months ahead,” Brainard said.

The Fed governor noted that there was some upward pressure in core service prices and in airfares, but there was some moderation in rent.

“I wouldn’t take a lot of signal from any one month of data, but I will be watching carefully for a continuation of this kind of pattern with a moderating of inflation and a declining number of categories seeing outsize price increases in the months ahead,” she said.

The bottom line was that “inflation is too high and getting inflation down is going to be our most important task,” Brainard added.

Headline U.S. inflation rose 1.2% in March and rose to a 8.5% annual rate in March, well above the Fed’s 2% target.

Energy prices added to 70% of the monthly gain in headline inflation, while food accounted for another 10%, Brainard said.

Some economists see signs inflation has now peaked, but they warn that it could remain stubbornly high for months.

Read: Peak inflation? Consumers seen paying higher prices for months

The Fed governor said the Fed planned to raise its benchmark policy interest rate “expeditiously” and could decide at its next meeting in May to start to reduce its balance sheet, which would lead to the runoff starting in June.

U.S. stocks
DJIA,
+0.19%

SPX,
+0.32%

were higher in the wake of the core inflation data, while yield on the 10-year Treasury note
TMUBMUSD10Y,
2.701%

declined.

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