Price hikes slowed significantly in March

Consumer prices rose 5% last month compared to a year ago, extending a monthslong slowdown of price increases as the Federal Reserve aims to bring inflation down to normal levels without pushing the U.S. into a recession, government data on Wednesday showed.

The fresh data showed the lowest year-over-year inflation rate since May 2021.

In February, year-over-year inflation was 6%. The data released on Wednesday marked the ninth consecutive month of smaller price hikes.

Prices showed a monthly gain of 0.1%, complicating a smooth downward path to normal price levels.

Despite an overall cooling of inflation, price hikes for some grocery store staples remain well above the average rate.

The price of flour jumped more than 17% over the past year, while the cost of eggs spiked 36% over that time, government data showed.

Since last year, the cost of margarine has leapt 33% and prices for cookies have surged more than 16%.

Some prices, however, have fallen over the past year, offering some relief for buyers.

Gas prices dropped 17% over the past year, government data showed, while television prices fell 14% over the period.

The data release arrives less than a month after the Federal Reserve imposed the latest in an aggressive string of borrowing cost increases, despite concern that previous rate increases helped trigger the nation's banking crisis.

Inflation has fallen significantly from a summer peak, though it remains more than double the Fed's target of 2%.

The rapid rise in interest rates, however, tanked the value of bonds held by Silicon Valley Bank, precipitating its failure and cascading damage for the financial sector.

With an aggressive string of rate hikes last seen in the 1980s, the Fed aims to slash price hikes by slowing the economy and choking off demand. The approach, however, risks tipping the U.S. economy into a recession.

Mounting evidence suggests rate hikes have slowed economic activity.

Nearly 190 banks are at risk of collapse amid high interest rates and declining asset values, according to a study released by a team of university researchers last month.

Meanwhile, the U.S. added 236,000 jobs in March, which marks robust job growth but a reduction from an average of 334,000 jobs added each month over the previous six months, according to government data released on Friday.

The International Monetary Fund said on Tuesday that it expects the U.S. economy to expand by 1.6% this year, which would prove a slowdown from 2.1% growth in gross domestic product last year.

Still, some key areas of the economy have proven resilient, despite the rate hikes.

Existing-home sales spiked 14.5% in February, ending a 12-month streak of declines and recording the largest monthly percentage increases in nearly two years, National Association of Realtors data showed.

Meanwhile, U.S. retail sales fell moderately in February but remained solid, suggesting that households still retain some pandemic-era savings.