Finance
Gas, housing and car insurance costs soar, fueling inflation in March
March inflation showed gas, housing and car insurance ticking up for another month (iStock)
Consumer prices rose faster than expected in March, pushing inflation up and giving the Federal Reserve more reason to delay dialing back interest rates.
On an annual basis, prices rose 3.5% in March, more than the 3.2% growth last month and above the 3.4% growth economists had expected, according to the Consumer Price Index (CPI) released by the Bureau of Labor Statistics (BLS). On a monthly basis, prices increased 0.4%, the same rate of growth as the previous month. Core inflation, which excludes more volatile food and energy prices, increased 0.4%, as it has done in each of the two preceding months. On an annual basis, core CPI rose 3.8%.
Shelter and gas costs weighed heavily on consumer expenses, contributing to over half the monthly increase in the index for all items. The energy index rose 1.1% in January after increasing 2.3% in February. Shelter prices increased 0.4% over the past two months to register an annual increase of 5.7%. Consumers also face rising prices in other areas of spending; notably, car insurance prices increased 2.6% in March, following a 0.9% increase in February. The index for apparel increased by 0.7% over the month. Also rising were prices for personal care, education and household furnishings and operations.
March’s CPI reading dampens the prospect that the Fed will reduce interest rates soon. Following its March meeting, Fed Chair Jerome Powell said that interest rate cuts were still on the table for this year, but the central bank revised projections of rate cuts to just three this year. Powell said that the Fed remained committed to bringing inflation down to a 2% target rate and warned that lowering rates too soon would bring the risk of bringing inflation back while holding back too long posed a risk to economic growth.
“Prices continue to rise overall, pressuring the finances of American Households in particular,” Max Slyusarchuk, A&D Mortgage founder and CEO, said. “More and more, families are feeling the squeeze of rising home and auto insurance costs, which continue to edge higher and higher. However, the economy remains strong, so don’t expect the Fed to lower rates any time soon.”
If you are struggling with high inflation, you could consider taking out a personal loan to pay down debt at a lower interest rate, reducing your monthly payments. Visit Credible to find your personalized interest rate without affecting your credit score.
SOCIAL SECURITY: COLA INCREASING BUT MEDICARE COSTS RISING TOO IN 2024
Consumers dealing with a tough housing market
High mortgage rates and high home prices have made renting a better month-to-month deal than buying a starter home in all 50 of the largest metro markets, according to the Realtor.com February 2024 Rental Report. Yet the shelter index has remained stubbornly high despite evidence that rents are falling.
Part of the disparity comes from how rents are measured in the index, according to Realtor.com Chief Economist Danielle Hale. CPI calculates rents based on rent trends, cash rent paid to the landlord for shelter and included utilities, plus any government subsidies paid to the landlord on the tenant’s behalf. If a unit is owner-occupied, the index computes what it would cost to rent that home in the current housing market, known as Owners’ Equivalent Rent (OER).
“This is why shelter inflation continues to climb, even though Realtor.com data show that rents have declined for seven months in a row,” Hale said in a statement. “This is a key factor tipping households toward renting, as the monthly cost of renting a starter home is lower than buying in all 50 major markets reviewed at today’s market rates.”
Homebuyers are unlikely to get much relief from high mortgage rates, which have not dropped below 6.6% this year.
“While rate cuts in June already seem to be a long shot at this point, it still seems more likely than not that short-term rates will decline towards the end of this year,” First American Senior Economist Xander Snyder said in a statement. “However, there are plenty of global uncertainties that could lead to supply shocks that re-accelerate inflation, which could push the rate-cut horizon even further into the future.”
If you’re looking to become a homeowner, you could find your best mortgage rates by shopping around. Visit Credible to compare your options without affecting your credit score.
AMERICANS LIVING PAYCHECK TO PAYCHECK OWN 60% OF CREDIT CARD DEBT: SURVEY
Get your car insurance under control with these steps
Car insurance rates have steadily increased. Drivers paid an average of $1,841 to insure a car in 2023, or 5% more than they did the previous year, according to a recent report from the Zebra. That comes after a 15% jump between 2022 and 2023. Unfortunately, 2024 will likely bring more of the same.
Drivers can save money by looking for new opportunities to save with their current carrier or by switching. These are some other options to consider for keeping your auto insurance affordable:
- Compare quotes from at least four to five companies before picking a policy, and reevaluate your policy every six months to ensure it still covers your needs.
- Look into insurance discounts and savings. Policies that offer discounts for low-risk behaviors — such as AAA membership or taking a senior driving safety class — can help drivers lower their car insurance premiums. Alternatively, a telematics program can help drivers save based on their driving habits.
- Only pay for the coverage you want and need. Understanding what your policy covers is the first step towards determining if it covers your needs. All U.S. states, except New Hampshire, require liability coverage, according to Insurify. This covers injuries and property damage sustained by other parties when you cause an accident.
If you are struggling with rising prices and want to save money, you could consider finding a new auto insurance provider to lower your monthly premium. Visit Credible to compare multiple car insurance providers at once and choose the one with the best rate for you.
Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.
U.S. Federal Reserve Chair Jerome Powell testifies before a Senate Banking, Housing and Urban Affairs Committee hearing on “The Semiannual Monetary Policy Report to the Congress,” at Capitol Hill in Washington, U.S., Feb. 11, 2025.
Craig Hudson | Reuters
The popular narrative among Federal Reserve policymakers these days is that policy is “well-positioned” to adjust to any upside or downside risks ahead. However, it might be more accurate to say that policy is stuck in position.
With an abundance of unknowns swirling through the economy and the halls of Washington, the only gear the central bank really can be in these days is neutral as it begins what could be a long wait for certainty on what’s actually ahead.
“In recent weeks, we’ve heard not only enthusiasm — particularly from banks, about possible shifts in tax and regulatory policies — but also widespread apprehension about future trade and immigration policy,” Atlanta Fed President Raphael Bostic said in a blog post. “These crosscurrents inject still more complexity into policymaking.”
Bostic’s comments came during an active week for what is known on Wall Street as “Fedspeak,” or the chatter that happens between policy meetings from Chair Jerome Powell, central bank governors and regional presidents.
Officials who have spoken frequently described policy as “well-positioned” — the language is now a staple of post-meeting statements. But increasingly, they are expressing caution about the volatility coming from President Donald Trump’s aggressive trade and economic agenda, as well as other factors that could influence policy.
“Uncertainty” is an increasingly common theme. In fact, Bostic titled his Thursday blog post “Uncertainty Calls for Caution, Humility in Policymaking.” A day earlier, the rate-setting Federal Open Market Committee released minutes from the Jan. 28-29 meeting, with a dozen references to the uncertain climate in the document.
The minutes specifically cited “elevated uncertainty regarding the scope, timing, and potential economic effects of possible changes to trade, immigration, fiscal, and regulatory policies.”
Uncertainty factors into the Fed’s decision making in two ways: the impact that it has on the employment picture, which has been relatively stable, and inflation, which has been easing but could rise again as consumers and business leaders get spooked about the impact tariffs could have on prices.
Missing the target
The Fed targets inflation at 2%, a goal that has remained elusive for going on four years.
“Right now, I see the risks of inflation staying above target as skewed to the upside,” St. Louis Fed President Alberto Musalem told reporters Thursday. “My baseline scenario is one where inflation continues to converge towards 2%, providing monetary policy remains modestly restrictive, and that will take time. I think there is a potential for inflation to remain high and activity to slow. … That’s an alternative scenario, not a baseline scenario, but I’m attentive to it.”
The operative in Musalem’s comment is that policy holds at “modestly restrictive,” which is where he considers the current level of the fed funds rate between 4.25%-4.5%. Bostic was a little less explicit on feeling the need to keep rates on hold, but emphasized that “this is no time for complacency” and noted that “additional threats to price stability may emerge.”
Chicago Federal Reserve President Austan Goolsbee, thought to be among the least hawkish FOMC members when it comes to inflation, was more measured in his assessment of tariffs and did not offer commentary in separate appearances, including one on CNBC, on where he thinks rates should go.
“If you’re just thinking about tariffs, it depends how many countries are they going to apply to, and how big are they going to be, and the more it looks like a Covid-sized shock, the more nervous you should be,” Goolsbee said.
Many risks ahead
More broadly, though, the January minutes indicated a Fed highly attuned to potential shocks and not interested in testing the waters with any further interest rate moves. The meeting summary pointedly noted that committee members want “further progress on inflation before making additional adjustments to the target range for the federal funds rate.”
There’s also more than just tariffs and inflation to worry about.
The minutes characterized the risks to financial stability as “notable,” specifically in the area of leverage and the level of long-duration debt that banks are holding.
Prominent economist Mark Zandi — not normally an alarmist — said in a panel discussion presented by the Peter G. Peterson Foundation that he worries about dangers to the $46.2 trillion U.S. bond market.
“In my view, the biggest risk is that we see a major sell off in the bond market,” said Zandi, the chief economist at Moody’s Analytics. “The bond market feels incredibly fragile to me. The plumbing is broken. The primary dealers aren’t keeping up with the amount of debt outstanding.”
“There’s just so many things coming together that I think there’s a very significant threat that at some point over the next 12 months, we see a major sell-off in the bond market,” he added.
In this climate, he said, there’s scant chance for the Fed to cut rates — though markets are pricing in the potential for a half percentage point in reductions by the end of the year.
That’s wishful thinking considering tariffs and other intangibles hanging over the Fed’s head, Zandi said.
“I just don’t see the Fed cutting interest rates here until you get a better feel about inflation coming back to target,” he said. “The economy came into 2025 in a pretty good spot. Feels like it’s performing well. Should be able to weather a lot of storms. But it feels like there’s a lot of storms coming.”
Walmart stock may be a steal.
Former Walmart U.S. CEO Bill Simon contends the retailer’s stock sell-off tied to a slowing profit growth forecast and tariff fears is creating a major opportunity for investors.
“I absolutely thought their guidance was pretty strong given the fact that… nobody knows what’s going to happen with tariffs,” he told CNBC’s “Fast Money” on Thursday, the day Walmart reported fiscal fourth-quarter results.
But even if U.S. tariffs against Canada and Mexico move forward, Simon predicts “nothing” should happen to Walmart.
“Ultimately, the consumer decides whether there’s a tariff or not,” said Simon. “There’s a tariff on avocados from Mexico. Do you have guacamole with your chips or do you have salsa and queso where there is no tariff?”
Plus, Simon, who’s now on the Darden Restaurants board and is the chairman at Hanesbrands, sees Walmart as a nimble retailer.
“The big guys, Walmart, Costco, Target, Amazon… have the supply and the sourcing capability to mitigate tariffs by redirecting the product – bringing it in from different places [and] developing their own private labels,” said Simon. “Those guys will figure out tariffs.”
Walmart shares just saw their worst weekly performance since May 2022 — tumbling almost 9%. The stock price fell more than 6% on its earnings day alone. It was the stock’s worst daily performance since November 2023.
Simon thinks the sell-off is bizarre.
“I thought if you hit your numbers and did well and beat your earnings, things would usually go well for you in the market. But little do we know. You got to have some magic dust,” he said. “I don’t know how you could have done much better for the quarter.”
It’s a departure from his stance last May on “Fast Money” when he warned affluent consumers were creating a “bubble” at Walmart. It came with Walmart shares hitting record highs. He noted historical trends pointed to an eventual shift back to service from convenience and price.
But now Simon thinks the economic and geopolitical backdrop is so unprecedented, higher-income consumers may shop at Walmart permanently.
“If you liked that story yesterday before the earnings release, you should love it today because it’s… cheaper,” said Simon.
Walmart stock is now down 10% from its all-time high hit on Feb. 14. However, it’s still up about 64% over the past 52 weeks.
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