Surging gas prices and high shelter costs sent inflation rising higher than expected in March, complicating the timeline for rate cuts from the Federal Reserve.
US consumer prices picked up again last month, marking a 3.5% increase for the 12 months ended in March, according to the latest Consumer Price Index data released Wednesday by the Bureau of Labor Statistics.
That’s a jump from February’s 3.2% rate and marks the highest annual gain in the past six months, highlighting that the path to lower inflation remains extremely bumpy and that any loosening of monetary policy might not happen soon.
US futures tanked Wednesday after the release of the hotter-than-expected inflation data, with Dow futures falling 400 points. Futures on the S&P fell by 1.25% and Nasdaq futures slipped by 1.3%. Treasury yields topped 4.5%.
The pace of price hikes slowed considerably in 2023, but that progress not only hit a roadblock to start this year, it moved into reverse.
“You can kiss a June interest rate cut goodbye,” Greg McBride, chief financial analyst for Bankrate, wrote in commentary issued Wednesday.
On a monthly basis, prices were unchanged from February’s 0.4% gain.
Gas and shelter costs contributed more than half of that monthly increase, according to the BLS. Aside from prices falling in only a couple of categories — used and new cars as well as fuel oil — or remaining flat (grocery store food), prices rose in pretty much every major category last month.
Economists were expecting a 0.3% monthly increase and an annual rate of 3.4%, according to FactSet consensus estimates.
The Fed has been wanting to see meaningful progress on inflation before it starts cutting rates.
Since the headline index can be heavily influenced by highly volatile categories such as food and energy, central bankers often look closely to the “core” index that strips out those categories.
However, core CPI did not slow as expected.
Excluding gas and food prices, categories that tend to be more volatile, core inflation rose 0.4% from the month before, bringing the annual rate to 3.8%, the same as February’s reading. Economists had anticipated a 0.3% monthly gain and for the annual rate to inch lower to 3.7%, according to FactSet.
This story is developing and will be updated.
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