The initial inflationary impulse generated by increased public expenditure to control the pandemic was followed by supply chain disruptions and the war in Ukraine. From thereon in the United States some of the main contributors to inflation originated in interest rate-sensitive sectors, such as housing and automobiles. This contrasted with less pressure from more volatile components of the consumer price index, such as food and fuels.
During the pandemic, increased demand pushed upward the prices of home ownership and rentals. For instance, in 2021, the rents for professionally managed apartments rose more than 10 percent. But high-interest rates depressed commercial property values, with prices of apartments down 21 percent, less than office prices which have fallen 25 percent.
The same with automobiles, another interest rate-sensitive component of the price index, which also soared during the pandemic. In this year’s first quarter, the average interest rate on a loan to purchase a new auto reached 7 percent, from 4.4 percent in 2022, with the average monthly payment at $730, from $656.
By contrast in March, grocery prices decreased from the previous month, while gasoline and residential natural-gas prices also declined. Therefore, in March the consumer price index in the United States decreased from a year earlier to 5 percent, the lowest in almost two years.
