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Inflation’s always been top of mind for economists. But since June 2022, when the Consumer Price Index (CPI) hit its highest level in 40 years (9.1%!) and the Federal Reserve hiked interest rates to their highest level in over 20 years, it’s become a talking point for most folks.
This is because inflation is a measure of our purchasing power. How much things cost and how quickly prices are rising directly impact not only how far a dollar will stretch for us, but also how far it will go for the companies that we invest in. And very few things make the stock market grumpier than a disappointing profit margin.
More recently, the ongoing conflict between the U.S., Israel and Iran has caused oil prices to spike to their highest level in four years and gas prices to soar above $4.00 per gallon, raising concerns that the decelerating inflation trend we’ve seen in recent years could reverse course.
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“No matter how long the Iran war goes on, the economy is bound to suffer from it,” write David Payne and Matthew Housiaux of The Kiplinger Letter. “How much and how severely depends on just how long the conflict continues to crimp key energy exports. Some degree of inflation is now inevitable.”
That’s why the March CPI report is one of the most-anticipated events on this week’s economic calendar.
What time is the March CPI report released?
The Bureau of Labor Statistics will release the March CPI report at 8:30 am Eastern Standard Time on Friday, April 10.
Headline CPI is expected to be up 0.8% from February to March and 3.1% from the year prior, according to FactSet. Core CPI, which excludes volatile food and energy prices, is forecast to rise 0.2% on a monthly basis and 2.7% year over year.
What is CPI?
“CPI is a measure of the average price of that basket of goods and services over time,” writes Kiplinger contributor Coryanne Hicks. “The specific goods and services within the CPI basket are based on information around 24,000 families and individuals give the U.S. Bureau of Labor Statistics on what they buy.”
Since inflation peaked nearly four years ago, the CPI and core CPI have declined. In February, headline inflation was up 2.4% year over year and core inflation was 2.5% higher.
While Payne categorizes the February CPI report as benign in the Kiplinger inflation outlook, he adds that it is “the calm before the storm.”
“Even if the war ends and gasoline prices fall back to their prewar level, inflation excluding volatile food and energy costs is likely to creep up toward a 3.0% rate by the end of the year, from the current pace of 2.5%, because of continued tariff effects and rising health care costs,” Payne explains.
And higher inflation, Payne says, will make the Federal Reserve reluctant to cut interest rates.
So what does this mean for the March CPI report? Here, we look at some of what economists, strategists and other experts around Wall Street expect the inflation data to show and what the results could mean for the Fed and investors going forward.
What to expect from the March CPI report
“The March CPI report should show the initial effects of the Iran war. We forecast a 1.0% m/m (0.99% unrounded) increase in headline CPI owing to a 10.6% m/m jump in energy prices. Core CPI, meanwhile, should be softer at 0.3% m/m (0.26% unrounded). While our forecast for core CPI is cooler than headline CPI, it still implies a 3.1% annualized rate.” – BofA Securities economists
“So far, shipping disruptions remain concentrated around the Strait of Hormuz, a critical corridor for global crude oil flows. Glenmede estimates that the resulting increase in oil prices could add ~0.8% to inflation over the next year. These conditions should give the Federal Reserve time to assess energy‑related inflation risks, reinforcing a likely pause through the summer while preserving optionality for rate cuts later this year if inflation remains well behaved.” – Jason Pride, Chief of Investment Strategy & Research and Michael Reynolds, Vice President of Investment Strategy at Glenmede
“The key highlight of this week’s data docket will be Friday’s March CPI where the impact of the largest energy supply shock since the 1970s will certainly be on full display. In terms of the subcomponents, we will be looking for further signs of tariff-related price pressures on the goods side, particularly in apparel. Unlike prior months when declines in used car and truck prices helped to mask tariff-related increases in other core goods, this month should see lagged gains in wholesale used car prices feeding through and adding to CPI. On the services side, our focus will be on any potential bleed-through from higher gasoline prices into core, particularly from airline fares and delivery services.” – Deutsche Bank economists
“The latest ISM services print showed weaker-than-expected activity alongside rising price pressures, reinforcing concerns about a stagflationary dynamic: slower growth combined with higher inflation. With CPI data due in the coming days expected to show a pickup in headline inflation, markets are also reassessing the Federal Reserve’s ability to ease policy in the near term. In essence, markets are stuck between two narratives: hope for de-escalation and fear of a more disruptive phase of the conflict. Until there is greater clarity volatility is likely to remain elevated, with asset prices continuing to react sharply to each new headline.” – Daniela Hathorn, Senior Market Analyst at Capital.com
“The March CPI report will put an abrupt end to the gradual disinflationary trend in place over the past two years. The recent oil shock is likely to dominate the view of inflation in March, but we expect the details to suggest that the modest downward trend in core CPI was already struggling to be maintained. A sustained increase in oil will further complicate progress in reducing inflation as higher production and transportation costs slowly seep into some core categories. Yet, the reduction in household purchasing power caused by higher gasoline prices is likely to limit the ability for some companies to pass on higher costs.” – Wells Fargo economists