Consumer prices rose 3.5% from a year ago in March, more than expected

The

consumer
price
index
accelerated
at
a
faster-than-expected
pace
in
March,
pushing

inflation
higher
and
likely
dashing
hopes
that
the

Federal
Reserve
will
be
able
to
cut

interest
rates
anytime
soon.

The
CPI,
a
broad
measure
of
goods
and
services
costs
across
the

economy,
rose
0.4%
for
the
month,
putting
the
12-month
inflation
rate
at
3.5%,
or
0.3
percentage
point
higher
than
in
February,
the
Labor
Department’s

Bureau
of
Labor
Statistics
reported
Wednesday.
Economists
surveyed
by
Dow
Jones
had
been
looking
for
a
0.3%
gain
and
a
3.4%
year-over-year
level.

Excluding
volatile
food
and
energy
components,
the
core
CPI
also
accelerated
0.4%
on
a
monthly
basis
while
rising
3.8%
from
a
year
ago,
compared
with
respective
estimates
for
0.3%
and
3.7%.

Stocks

slumped
after
the
report
while
Treasury
yields
spiked
higher.

Shelter
and
energy
costs
drove
the
increase
on
the
all-items
index.

Energy
rose
1.1%
after
climbing
2.3%
in
February,
while
shelter
costs,
which
make
up
about
one-third
of
the
weighting
in
the
CPI,
were
higher
by
0.4%
on
the
month
and
up
5.7%
from
a
year
ago.
Expectations
for
shelter-related
costs
to
decelerate
through
the
year
have
been
central
to
the
Fed’s
thesis
that
inflation
will
cool
enough
to
allow
for
interest
rate
cuts.

Food
prices
increased
just
0.1%
on
the
month
and
were
up
2.2%
on
a
year-over-year
basis.
There
were
some
big
gains
within
the
food
category,
however.

The
measure
for
meat,
fish,
poultry
and
eggs
climbed
0.9%,
pushed
by
a
4.6%
jump
in
egg
prices.
Butter
fell
5%
and
cereal
and
bakery
products
declined
by
0.9%.
Food
away
from
home
increased
0.3%.

Elsewhere,
used
vehicle
prices
fell
1.1%
and
medical
care
services
prices
rose
0.6%.

Increasing
inflation
was
also
bad
news
for
workers,
as

real
average
hourly
earnings
were
flat
on
the
month
and
increased
just
0.6%
over
the
past
year,
according
to
a
separate
BLS
release.

The
report
comes
with
markets
on
edge
and
Fed
officials
expressing
caution
about
the
near-term
direction
for
monetary
policy.
Central
bank
policymakers
have
repeatedly
called
for
patience
on
cutting
rates,
saying
they
have
not
seen
enough
evidence
that
inflation
is
on
a
solid
path
back
to
their
2%
annual
goal.
The
March
report
likely
confirmed
worries
that
inflation
is
stickier
than
expected.

Markets
had
expected
the
Fed
to
start
cutting
interest
rates
in
June
with
three
reductions
in
total
expected
this
year,
but
that
shifted
dramatically
following
the
release.
Traders
in
the
fed
funds
futures
market
pushed
expectations
for
the
first
cut
out
to
September,
according
to
CME
Group
calculations.

“There’s
not
much
you
can
point
to
that
this
is
going
to
result
in
a
shift
away
from
the
hawkish
bent”
from
Fed
officials,
said
Liz
Ann
Sonders,
chief
investment
strategist
at
Charles
Schwab. “June
to
me
is
definitively
off
the
table.”

The
Fed
also
expects
services
inflation
to
ease
through
the
year,
but
that
has
shown
to
be
stubborn
as
well.
Excluding
energy,
the
services
index
increased
0.5%
in
March
and
was
at
a
5.4%
annual
rate,
inconsistent
with
the
Fed’s
target.

“This
marks
the
third
consecutive
strong
reading
and
means
that
the
stalled
disinflationary
narrative
can
no
longer
be
called
a
blip,”
said
Seema
Shah,
chief
global
strategist
at
Principal
Asset
Management. “In
fact,
even
if
inflation
were
to
cool
next
month
to
a
more
comfortable
reading,
there
is
likely
sufficient
caution
within
the
Fed
now
to
mean
that
a
July
cut
may
also
be
a
stretch,
by
which
point
the
US
election
will
begin
to
intrude
with
Fed
decision
making.”

Later
Wednesday,
the
Fed
will
release
minutes
from
its
March
meeting,
providing
more
insight
into
where
officials
stand
on
monetary
policy.

Multiple
Fed
officials
in
recent
days
have
expressed
skepticism
about
lowering
rates.
Atlanta
Fed
President
Raphael
Bostic
told
CNBC
that
he
expects
just
one
cut
this
year,
likely
not
coming
until
the
fourth
quarter.
Governor
Michelle
Bowman
said
an
increase
may
even
be
necessary
if
the
data
does
not
cooperate.