WASHINGTON (AP) -- The persistence of high inflation will likely be on display -- again -- in Wednesday's latest government report on consumer price increases.
Yet there may also be some signs of improvement in the March inflation data, with the prices of some key items, such as gasoline, furniture and new cars, potentially rising more slowly or falling outright. Compared with 12 months earlier, economists predict that inflation slowed sharply, from 6% in February to 5.2% in March, according to a survey by the data provider FactSet.
But excluding volatile food and gas costs, so-called core prices are thought to have ticked up to 5.6% from a year ago, compared with a 5.5% rise in February. That figure has changed little since December. The Federal Reserve and many private economists regard core prices as a better measure of underlying inflation.
Rapid price increases in the economy's vast service sector -- ranging from rents and restaurant meals to haircuts and auto insurance -- are keeping core inflation high, at least for now. From February to March, core prices are expected to have risen a substantial 0.4% for the third time in the past four months.
That stubbornness will likely lead the Fed to raise its benchmark interest rate for a 10th straight time when it meets in May. Fed officials have projected that after one additional quarter-point increase -- which would raise their benchmark rate to about 5.1%, its highest level in 16 years -- they will pause their hikes but leave their rate elevated through this year.
When the Fed tightens credit with the goal of cooling the economy and inflation, it typically leads to higher rates on mortgages, auto loans, credit card borrowing and many business loans. The risk is that ever-higher borrowing rates can weaken the economy so much as to cause a recession.
On Tuesday, the International Monetary Fund, a 190-nation lending organization, warned that persistently high inflation around the world -- and efforts by central banks, including the Fed, to fight it -- would likely slow global growth this year and next.
"Inflation is much stickier than anticipated even a few months ago," Pierre-Olivier Gourinchas, the IMF's chief economist, wrote in its latest World Economic Outlook.
Even so, there are signs that inflation pressures are easing, which could mean lower core price increases in the months ahead. One unfortunate reason inflation could decline is that economists expect growth to slow in the United States later this year, in part because turmoil in the banking sector may cause banks to restrict lending.
The Fed's year-long streak of rate hikes are also starting to cool a hot labor market, with recent data showing that companies are advertising fewer openings and that wage growth has been slowing from historically elevated levels.
"Should inflation come in as we expect, the Fed is unlikely to take much comfort," economists at Bank of America wrote in a research note. "However, the slowdown in other (economic) data should translate into downward pressure on inflation over time."
The biggest driver of core inflation is probably the cost of housing, including rents. They are rising at an annual pace of about 9%, according to the government's figures.
Still, Apartment List, which tracks real-time changes in new leases, shows rents rising at a 2.6% pace compared with a year ago. As more apartments reset with those smaller increases, the government's inflation data should show milder increases in coming months.
The Fed is also laser-focused on the cost of services, which are rising at historically rapid rates. Officials at the central bank have said they believe that raising wages, while good for workers, are contributing to those price increases.
Last week's March jobs report, though, showed that wage growth has slowed steadily in the past year. Businesses are posting fewer open positions, and the number of Americans quitting their jobs to take new, mostly higher-paying work -- a driver of higher pay -- is falling.
A more worrisome trend is the possibility that banks will pull sharply back on lending to conserve funds, after two large banks collapsed last month, igniting turmoil in the United States and overseas. Many smaller banks have lost customer deposits to huge global banks that are perceived to be too big to fail. The loss of those deposits will likely mean that those banks will extend fewer loans to companies and individuals.
Some small businesses say they are already having trouble getting loans, according to a survey by the National Federation for Independent Business. The IMF said Tuesday that pullbacks in lending could slow growth by nearly a half-percentage point over the next 12 months.
A slowdown in the economy could cool inflation and as a result would help the Fed achieve its objectives. But the blow to the economy might prove larger than expected. Under the worst-case scenario, it could mean a full-blown recession with the loss of millions of jobs.