US inflation likely to accelerate further with Ukraine war, economists say

Russia’s invasion of Ukraine has dashed any hopes US consumers had of soaring cost relief, with prices at gas stations rising at the fastest pace in nearly 17 years in the last week and other goods such as food, also about to jump.

Even before the invasion, it was expected that the next monthly US inflation report, due out on Thursday, will show prices rising at the fastest pace in 40 years.

The data, which refer to February, will probably show only a preliminary impact from the increase in oil prices, which reached more than 130 dollars a barrel on Monday (7), but the jump should fuel general inflation in the coming months.

“There were expectations that February would be the peak of annual inflation, but the shock in Ukraine is already pushing up gasoline prices for March,” said Tim Duy, economist at SGH Macro Advisors.

The developments also come at a difficult time for the Biden administration, already criticized for rising rent, electricity and food costs as the economy grapples with the impact of the Covid-19 pandemic.

Officials at the U.S. Federal Reserve will also closely monitor the inflation reading, which will be released just under a week before the meeting at which the Fed is expected to raise interest rates by 0.25 percentage point, starting a tightening cycle. monetary policy aimed at reducing inflation, but without hampering economic expansion.

Economists polled by Reuters predict the US consumer price index rose 7.9% from a year earlier in February, up from 7.5% in January. The monthly rate must have accelerated to 0.8% after rising 0.6% in the previous month.

The average price of regular unleaded gasoline in the US was $4,065 a gallon (3.8 liters) on Monday, according to the American Automobile Association (AAA), just about 5 cents below its record high. Last week’s increase of about 45 cents a gallon was the biggest since 2005, the AAA said.