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The Consumer Price Index (CPI) rose 0.6% in March from February, the Labor Department reported this morning. Year over year consumer prices are 2.6% higher than they were in March 2020.

Economists had projected that the headline CPI would climb 0.5% in March from February and 2.5% year over year.

Financial markets shrugged off the numbers. The Standard & Poor’s 500 closed the day, April 13, 0.33% higher although the Dow Jones Industrial Average finished down 0.20%. The NASDAQ Composite climbed 1.05%. The small cap Russell 2000 index slipped 0.22%. The yield on the 10-year Treasury fell 5 basis points to 1.62%.

So far, then, the financial markets are buying into the Federal Reserve’s argument that the rise in inflation numbers will be temporary and is a result of comparing prices in March 2021 to prices in March 2020, when, because of the pandemic recession, prices actually fell as demand collapsed.

Furthermore, the rise in the headline CPI was driven by a huge 9.1% increase in gasoline prices in March. For inflation, which excludes volatile energy and food prices, rose 0.3% in March from February. The February rate was up just 0.1% from January.

The Fed now expects inflation to hit 2.4% for 2021. That’s up from an earlier estimate of a 1.8% rate.