The consumer price index rose 8.5% in March compared to last year. While it is a good measure of inflation, the producer price index is a better one. Based more on costs that companies will pass along to customers, it rose 11.2% for the 12-month period that ended in March. The Bureau of Labor Statistics commented it was “the largest increase since 12-month data were first calculated in November 2010.”

Energy prices rose between 36% and 55%, depending on the source of demand. Passenger transportation rose 22%. Prices for materials made for manufacturing rose over 20%, which is another cost expected to be passed along to consumers.

Some of the trouble was described as due to the supply constraints created by the Russian invasion of Ukraine. Another culprit was high employment levels. It is another problem the solution of which will be passed along to the Federal Reserve, which may not have adequate tools to solve it.

The Ukraine invasion should not be considered the only reason for the rise. And no one should think that oil is the primary culprit. The Wall Street Journal reports that Blerina Uruci, U.S. economist at T. Rowe Price, said, “We’re seeing strong inflation momentum across the board, both for goods and services.”

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Former Treasury Secretary Larry Summers believes it is too late for the Fed to stop an economic downturn. He recently wrote in The Washington Post, “There is a first time for everything, but over the past 75 years, every time inflation has exceeded 4 percent and unemployment has been below 5 percent, the U.S. economy has gone into recession within two years.” Both those factors are part of the economy today.

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