A closely watched measure of US inflation picked up in March, rising to an annual rate of 3.5%, the US Department of Labor announced on Wednesday.
The consumer-price index (CPI) – which measures a broad range of goods and services – rose 0.4% from February, higher than the 0.3% expected. Core CPI, which removes the volatile food and energy categories rose 0.4% from February v an expected 0.3%.
The latest news will be closely parsed by the Federal Reserve, which has been attempting to cool inflation with a series of interest rate rises. Monthly inflation figures proved higher than expected in both January and February.
Inflation has fallen sharply from a high of over 9% in 2022 but it has remained stubbornly above the Fed’s target rate of 2%.
March’s increase was driven by rising costs for shelter and gasoline. “Combined, these two indexes contributed over half of the monthly increase in the index,” the labor department said. Gasoline rose 1.7% from the previous month and is 1.3% higher than the same time last year. Shelter is 5.7% higher than a year ago and rose 0.4% over the month.
The Fed increased its benchmark interest rate from near zero to over 5% over the last 16 months in a bid to cool inflation. Recently the central bank has held off on further rate rises and economists had expected rate cuts later this year. Those hopes have faded in recent weeks amid signs that inflation has remained sticky.
The US central bank has a twin mandate – to keep prices under control and achieve maximum employment. The jobs market has remained surprisingly robust despite the Fed’s attempts to cool the economy, adding 303,000 positions last month.
Paul Ashworth, chief north America economist at Capital Economics, said the latest inflation report “pretty much kills off hopes of a June rate cut from the Fed”.
