Treasury

Stubborn inflation weakens prospects for rate cuts

March’s 3.5% CPI increase largely due to shelter, gas prices.
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· less than 3 min read

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The case for a pending Federal Reserve interest rate cut just got weaker, thanks to this darned stubborn inflation.

The consumer price index (CPI) increased 3.5% year over year in March, an uptick from February’s 3.2% increase, according to the Bureau of Labor Statistics. A bump in costs for shelter and gasoline accounted for the majority of the March increase.

Markets were not happy. According to CNBC, the yield on the 10-year Treasury bond bounded above 4.5% after the CPI showed it wasn’t ready to quiet down just yet. Stocks were down on the news, the Wall Street Journal reported.

“Rate cuts could be out the window,” David Russell, global head of market strategy at TradeStation, told CNBC.

Here’s more fun news: Energy prices increased 2.1% over the 12 months ending in March, marking the first annual increase of the BLS’s energy index in more than a year (since February 2023). Gas prices were up 1.7% for the month and 1.3% annually in March. Electricity prices edged up 0.9% over February, but were up 5% over the last 12 months. Conflicts in Ukraine and the Middle East drove up the cost of crude oil internationally, which could have impacted the uptick in US energy pricing, the New York Times reported.

In a statement, President Joe Biden said that while inflation has fallen from record highs, more work needs to be done.

“Prices are still too high for housing and groceries, even as prices for key household items like milk and eggs are lower than a year ago,” Biden said. He called on companies (specifically naming grocery stores) “to use record profits to reduce prices.”

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News built for finance pros

CFO Brew helps finance pros navigate their roles with insights into risk management, compliance, and strategy through our newsletter, virtual events, and digital guides.