The CPI for March is up 0.4 percent month-over-month to match February's increase. The consensus in the Econoday survey of forecasters was up 0.3 percent. The core CPI excluding food and energy is also up 0.4 percent in March from the prior month and the same as the 0.4 percent increase in February. Econoday's consensus for the core was also 0.3 percent. A slightly stronger than expected rise in the energy index, at 1.1 percent on the month, is likely the main reason for the above-consensus reading.

Compared to a year ago, the March all-items CPI is up 3.5 percent and the fastest rise since up 3.7 percent in September 2023. However, the core CPI year-over-year increase is 3.8 percent in March, the same as in February. Some month-to-month volatility does not change the underlying picture of moderation in upward price pressures, albeit at an incremental pace.

The index for shelter costs about 1/3 of the CPI basket is up 0.4 percent in March from February, the same increase as in February from January. The year-over-year increase in shelter costs is 5.7 percent in March, also the same as in February. Cost increases for shelter remain substantial. While increases have come down substantially from the increases seen in early 2023, a leveling off if sustained means that higher home prices and limited housing stock will keep this component from falling as much or as soon as hoped. The CPI excluding shelter only is up 0.4 percent in March from February and up 2.3 percent year-over-year. The CPI excluding food, energy, and shelter is up 0.3 percent in March from the prior month and up 2.4 percent year-over-year.

Upward price pressures continue to be concentrated in the services sector. The commodities price index is up a scant 0.1 percent in March from February and up 0.6 percent from March 2023. The services index is up 0.5 percent in March from February and up 5.3 percent year-over-year.

While the FOMC's preferred measure for inflation is the PCE deflator, Fed policymakers will pay close attention to what the CPI is telling them. In this case, the March CPI data confirm their expectations that getting inflation reliably back to the 2 percent objective for price stability is going to be a long road and one which will require patience to successfully navigate. In judging the risks to the outlook for the US economy and inflation, policymakers are going to continue to lean toward less risk in keeping rates higher for longer than in reducing restriction in monetary policy too soon.

Consumer prices have come in on the high end of Econoday's consensus ranges the past three reports. Core prices in March are expected to slow to a monthly increase of 0.3 percent versus 0.4 percent in February. Overall prices are also expected to rise 0.3 after also increasing 0.4 percent in February. Annual rates, which in February were 3.2 percent overall and 3.8 percent for the core, are expected at 3.5 and 3.7 percent respectively.

The CPI is a measure of the change in the average price level of a fixed basket of goods and services purchased by consumers. Monthly changes in the CPI represent the rate of inflation for the consumer. Annual inflation is also closely watched.

The consumer price index is available nationally by expenditure category and by commodity and service group for all urban consumers (CPI-U) and wage earners (CPI-W). All urban consumers are a more inclusive group. The CPI-U is the more widely quoted of the two, although cost-of-living contracts for unions and Social Security benefits are usually tied to the CPI-W, because it has a longer history. Monthly variations between the two are slight.

The CPI is also available by size of city, by region of the country, for cross-classifications of regions and population-size classes, and for many metropolitan areas. The regional and city CPIs are often used in local contracts.

The Bureau of Labor Statistics also produces a chain-weighted index called the Chained CPI. This measures a variable basket of goods and services whereas the regular CPI-U and CPI-W measure a fixed basket of goods and services. The Chained CPI is similar to the personal consumption expenditure price index that is closely monitored by the Federal Reserve Board.

The consumer price index is the most widely followed monthly indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact.

Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets- and your investments.

If someone borrows $100 dollars from you today and promises to repay it in one year with interest, how much interest should you charge? The answer depends largely on inflation as you know the $100 will not be able to buy the same amount of goods and services a year from now. The CPI tells us that prices rose 4.2 percent in the U.S. over 2007. To recoup your purchasing power, you would have to charge 4.2 percent interest. You might want to add one or two percentage points to cover default and other risks, but inflation remains the key factor behind the interest rate you charge.

Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.