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Ukraine war to push US inflation even higher

  • By Al Mayadeen Net
  • Source: Agencies
  • 12 Apr 2022 14:03
3 Min Read

Americans expect prices to spike even higher, worsening inflation.

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  • Ukraine war set to push record US inflation even higher
    Americans have been subjected to continually increasing price rises.

On Tuesday, US official data will almost certainly confirm what many Americans already suspected: prices rose at record rates last month, continuing a trend that began last year but has been exacerbated by Russia's military operation in Ukraine.

The March consumer price index (CPI) report from the Labor Department will be the first to completely incorporate the shock created by the Ukraine crisis and Western sanctions against Moscow, and it is almost guaranteed to show a surge in gasoline and other petroleum products prices.

"Russia's invasion of Ukraine has definitely added upside risks to US inflation through channels such as energy, food and also elevated risks of supply bottlenecks lingering for longer," Pooja Sriram of Barclays said.

Americans have been subjected to continually increasing price rises that reached 7.9 percent in the year to February, a rate not seen in four decades.

Read more: US sanctions on Russia likely to boomerang, drive inflation higher: Banker

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However, when the Federal Reserve raises interest rates, some economists predict the report will also represent the pinnacle of the inflation wave that began last year as the economy recovered from Covid-19 – though consumers may not feel relief for some time.

"The subsequent slowing may not be meaningful given all the supply restrictions on products from Russia and Ukraine as well as the growing supply chain bottlenecks on finished goods from China due to the Covid lockdowns there," Karl Haeling of LBBW said.

The inflationary trend has become a political problem for President Joe Biden, and before the release of the statistics, the White House temporarily waived a seasonal limit on sales of E15 gasoline, which is cheaper but generally not permitted to be sold during the summer.

But it won't stop the Labor Department from publishing another astronomical year-on-year inflation rate in March, which economists predict will be about 8.5 percent.

Could it reach its peak? 

After years of subdued pricing pressures, inflation began to rise as the economy rebounded a year ago, fueled by the Fed's pandemic-era cheap money policies, global component shortages and shipping delays, and government stimulus packages that fattened Americans' wallets and spurred up demand.

Economists expect CPI to climb by 1.2 percent in March compared to February, but "core" CPI, which includes volatile food and energy costs, will rise by 0.5 percent, the same as the previous month.

Pantheon Macroeconomics Ian Shepherdson anticipated that "this will be the top" of yearly rises, but only because subsequent reports will be compared to months in 2021 when prices were already rising.

According to Shepherdson, gasoline will play a significant part in March's price increases, adding 0.7 percent to the monthly total. Food prices jumped throughout the month, as did hotel and travel expenses, he said, however, prices for scarcely used autos may fall after recent increases.

Read more: US oil reaches all-time high amid sanctions on Russia

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