“The Federal Reserve in a difficult spot”: New CPI Data Out

According to the report, the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4% in March on a seasonally adjusted basis, which is the same increase as February saw.

The all items index rose 3.5% for the last 12 months.

All items less food and energy saw an increase of 0.4%. The index for all items less food and energy over the last 12 months increased 3.8%.

“The US CPI report came in a tad above expectations, with the headline index 0.38% higher than the month prior, while market consensus was locked in at 0.3%,” says financial analyst at Steno Research Oskar Vårdal. “Core inflation also increased compared to February, coming in at 0.36% with consensus at 0.3%.”

The energy index increased 2.1% for the 12 months ending March.

"Higher energy prices and a smoking hot month for transportation cost lifted the consumer price index,” explains Vårdal. “Meanwhile the 'Used Cars & Trucks' category made its attempt to drag price pressures down."

The US Federal Reserve has consistently been promising three rate cuts in 2024, but with the new numbers, that promise may seem decreasingly plausible.

“The shelter category also came in hot, which leaves the Federal Reserve in a difficult spot,” says Vårdal. “They might have to pivot from the promise of three rate cuts, which they gave markets back in December."

In late March Fed Chairman Jerome Powell remarked that he believed that, despite  January and February CPI and PCE numbers being higher than expected, it did not change “the overall story,” of inflation moving down on a “sometimes bumpy road” toward 2%.