Consumer Prices Remained Tame in March, Rising Just 0.1%

More than a year into the record fiscal stimulus spending package, and so far there's little sign of inflation. Consumer prices rose just 0.1% in March, the U.S. Labor Department announced Wednesday. The core rate -- which excludes the often-volatile food and energy component -- was unchanged in the month.

Economists surveyed by Bloomberg News had expected consumer prices to increase 0.1% in March after no increases in February, and the core rate to rise 0.1% after a 0.1% increase in February. Consumer prices rose 0.2% in January, with the core rate declining 0.1%.

Over the past year, the U.S. economy has shown little sign of inflation: Consumer prices have risen just 2.3% in the past 12 months. And the core CPI, which the U.S. Federal Reserve closely monitors, has risen only 1.1% in the past year -- or within the Fed's "comfort zone" for inflation. That 1.1% rate is also the lowest year-over-year pace in six years.

Still Plenty of Slack

In March, apparel prices decreased 0.4%, food prices rose 0.2%, gasoline fell 0.8%, fuel oil was up 0.7%, natural gas dropped 0.7%, shelter costs slipped 0.1%, electricity costs jumped 2.1%, medical care prices climbed 0.3%, new-vehicle prices edged up 0.1%, and used-car/truck prices rose 0.5%.

Most economists don't expect inflation to rise in the months ahead. They say the recession that has idled factory production and resulted in more than 8.4 million layoffs has led to excess capacity in the commercial sector and slack in the labor force that will limit price-wage increases.

Also working against inflation: the reluctance of foreign manufacturers that export goods to the U.S. to raise prices amid intense competition. Many refuse to raise prices despite cost increases, for fear of being priced out of the lucrative U.S. market.

In sum, March's consumer price report shows price hikes continue to be subdued -- at least at this juncture of the Fed's and Congress's effort to reliquefy credit markets and jump-start the U.S. economy. With the core rate up just 1.1%, the Fed will be able to stick to its accommodative monetary policy for a longer period of time to stimulate the U.S. economy, without the fear of rising prices.