Will we continue a long round of stagflation?

“Inflation Rebounds on Oil Prices As Housing Start Hit 17-Year Low

U.S. consumer prices rebounded in March on the back of rising oil prices, a government report showed, a sign of growing concern for Federal Reserve policy makers in the midst of an easing cycle aimed at calming troubled financial markets.

Meanwhile, home construction plummeted 12% during March, dropping to its lowest level in 17 years, the government said Wednesday in a report signaling the housing sector will continue slumping.

The inflation buildup comes as oil prices have hit fresh record highs in recent weeks, pushing up the price of gasoline drivers pay at the pump. Nymex crude topped $114 a barrel Tuesday, resulting in a 19% gain so far this year and 79% from the same time a year ago.

The consumer price index was up 0.3% in March, the Labor Department said Wednesday. Core inflation, which excludes food and energy, posted a 0.2% gain. The figures matched expectations of Wall Street economists surveyed by Dow Jones Newswires.

Unrounded, the CPI rose 0.343% last month, while core CPI advanced 0.152% unrounded. Consumer prices rose 4% on a year-to-year basis, the same rate as in February. Core CPI grew 2.4% on an annual basis.

That’s above the top end of the Fed’s presumed comfort zone of around 1.5% to 2%. The Fed’s preferred gauge, the core price index for personal consumption expenditures, has also been climbing, reaching 3.4% annual growth through February.

Rising inflation complicates the Fed’s task to keep pumping enough liquidity into financial markets to ease turbulence. The credit crunch and housing downturn are also hurting the broader economy, with Fed Chairman Ben Bernanke recently acknowledging the risk that the economy could slide into a recession.”