As a result, we refrained from raising interest rates, even though inflation was accelerating. Our initial analysis was that this increase in inflation would be temporary. However, both core and total CPI inflation remain well above target.
This reflects the impact of higher-than-expected prices for crude oil and natural gas, continuing increases in auto insurance premiums, and price pressures in certain sectors, such as housing, food, and some services. The higher inflation also suggests an underlying firmness in the price-setting environment. In other words, relative price increases wouldn't be pushing up trend inflation if there was not sufficient demand.