The 0.4% increase in the headline CPI in March likely puts to bed hopes that June’s Federal Open Market Committee meeting would usher in the first interest rate cut. March’s increase surpassed expectations of a 0.3% increase and lifted the annual rate from 3.2% to 3.5%, its highest since September. Excluding food and energy, core CPI rose 0.4% in March. March’s increase keeps the annual core CPI rate at 3.8%, the same as February. Using an annualized three-month moving average, core CPI was running at 4.5% in March, its highest since early 2023. March’s report was a disappointing one, but anxieties should be held in check. Hot CPI reports have been accompanied by lukewarm PCE deflator data. Progress in the fight against inflation has certainly stalled, but the core PCE, which relies less on shelter and measures healthcare inflation differently, has steadily inched downward.
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