The consumer price index rose by 0.4% in March, higher than expected, fueled by increased costs for gasoline and rental housing. This marks the third consecutive month of strong consumer price readings, following news of accelerated job growth in March. Fed Chair Jerome Powell has stated that there is no rush to lower borrowing costs, and financial markets now anticipate a delay in interest rate cuts until September. The upcoming U.S. presidential election is also impacted by the stubbornly higher cost of living.
Gasoline prices rose by 1.7% in March after a 3.8% increase in February, while shelter costs, including rents, also rose by 0.4%, matching February’s gain. Food prices increased by 0.1%, with grocery food inflation remaining unchanged. Meat and egg prices rose, while there were declines in the costs of butter and cereals. In the 12 months through March, the CPI increased by 3.5%, the highest rate since September, and above the Fed’s 2% inflation target.
While the annual increase in consumer prices has declined from a peak of 9.1% in June 2022, the disinflationary trend has stalled in recent months. The expectation for the first rate cut has been pushed back to September, from June, with financial markets now predicting only two rate cuts instead of three. Some economists believe the window for rate cuts may be closing, as the Fed has maintained its policy rate unchanged since July. U.S. stocks opened lower, the dollar rallied, and U.S. Treasury prices fell in response to the data.
Excluding food and energy components, the core CPI rose by 0.4% in March, boosted by a 0.5% increase in rents and increases in motor vehicle insurance, healthcare, apparel, and personal care costs. Owners’ equivalent rent (OER) also climbed by 0.4%. However, prices for used cars and trucks, recreation, and new vehicles fell. Core goods prices decreased by 0.2%, while services excluding energy rose by 0.5%. In the 12 months through March, the core CPI rose by 3.8%, matching the previous month’s increase.
