The News
U.S. inflation ticked higher in March, another signal that the Federal Reserve will likely hold off on cutting interest rates in the coming months. Consumer prices rose by 3.5% from a year earlier, a higher-than-expected increase that was also up from February’s numbers.
Housing and energy costs accounted for more than half of the month-to-month increase for all of the items included in the consumer price index, data from the Bureau of Labor Statistics showed Wednesday.
The numbers came as an unwanted surprise for the Fed, which is trying to fight rising prices and entered 2024 on a note of optimism, with several economic indicators looking up. But higher-than-expected price increases at the beginning of the year disrupted the central bank’s “remarkable streak of welcome news,” The Washington Post reported.
SIGNALS
Third month of higher inflation likely to delay rate cuts
While inflation was hotter than expected in January and February, the Fed was willing to downplay those readings as “reflecting potential seasonal quirks,” The Wall Street Journal reported. But after a third straight month, the situation appears more serious than officials had hoped.
As of March 20, the Fed still expected to cut interest rates three times this year, after pushing them to their highest level in 23 years owing to the pandemic. However, these new numbers will likely postpone those cuts until July or later. Some investors doubt there will be any cuts at all.
Republicans hammer Biden on inflation despite jobs report
Republicans are ignoring another strong jobs report, instead turning their attention to rising inflation as a way to target President Joe Biden as he competes for reelection. “For most Americans, they are worse off,” an economic adviser for former President Donald Trump told Politico. “So we’re going to continue to blast the Biden economy as not working for middle class Americans.”
“INFLATION is BACK—and RAGING!” Trump posted on Truth Social after the report’s release. Biden, meanwhile, said in a statement that “we have more to do to lower costs for hardworking families” while accusing congressional Republicans of trying to “slash taxes for billionaires and big corporations, while helping special interests and Big Pharma raise prices.”
European Central Bank might beat Fed to the punch
Investors are “considering an unusual scenario,” The Wall Street Journal reported: The European Central Bank might cut interest rates before the Federal Reserve does, an unconventional move from a central bank that rarely diverges from its U.S. counterpart.
Most investors still expect the Fed to cut rates first, but if the ECB beats it to the punch, it could weaken the euro while boosting spending and investment, asset-management firm Alliance Bernstein predicted.