The Federal Reserve issued the minutes of both its unscheduled meetings of March 3rd and March 15th, outlining the deteriorating conditions that led to its expansion of lending and Treasury securities purchases along with a drop of the federal funds rate to 0.0% - 0.25%, which was expected to remain in place until at least the middle of 2021. Before the implementation of widespread social distancing guidelines, the economy had been on a strong footing, with consumer spending a key driver of economic growth, and while online shopping was expected to replace some consumer spending, it was “unlikely to replace it fully”. The Federal Reserve also announced up to $2.3 trillion more in loans to support the Paycheck Protection Program, the CARES Act, and establish a Municipal Liquidity Facility to help state and local governments manage their cash flow during the pandemic.

Wholesale inflation fell -0.2% in March, largely due to a -6.7% drop in energy prices, which was itself due to gasoline prices falling -16.8%. Service prices were up +0.2%, primarily from a +1.4% increase in trade services, which measure the changes in margins for wholesalers and retailers. Producer prices were up +0.7% for the year, and after stripping out the volatile food, energy, and trade components, yearly core prices were up +1.0%. Compared to February, there were notable drops in prices for export energy (-10.3%), passenger transportation (-7.9%), and nondurable consumer goods (-2.7%).

Consumer prices were down -0.4% in March, for the largest monthly decline since January 2015, with yearly inflation falling to 1.5% from February’s 2.3% rate. As with wholesale prices, consumer prices were pulled down by energy costs, including a -13.7% drop in fuel oil and a ‑10.5% drop in gasoline. Excluding food and energy costs, core prices were down -0.1% for the month and up +2.1% for the year. Service prices fell in March for transportation by -1.9% (-0.7% Y/Y), and were unchanged for shelter (+3.0% Y/Y), but grew for medical care by +0.5% (+5.5% Y/Y). Good prices fell for apparel (-2.0%, -1.6% Y/Y) and were unchanged for medical goods (+1.3% Y/Y). Prices rose for used cars (+0.8%, +0.1% Y/Y), and fell for new cars by -0.4% (-0.4% Y/Y), but the report referenced an implementation note listing inadequate data for new and used motor vehicle collection for some areas.