United States: Inflation comes in at highest level since September 2023 in March
Inflation came in at 3.5% in March, which was up from February’s 3.2% and above market expectations and the Fed’s 2.0% target. March’s result represented the highest inflation rate since September 2023. Looking at the details of the release, the change in prices for housing rose at a softer rate in March, though this was more than offset by prices for transportation rising at a faster rate.
Annual average inflation ticked down to 3.5% in March (February: 3.6%). Meanwhile, core inflation was steady, coming in at February’s 3.8% in March.
Lastly, consumer prices rose 0.38% from the previous month in March, coming in below February’s 0.44% rise.
Though inflation should pull back later in 2024, it will likely remain above the Fed’s target throughout the year. The higher-than-expected March print—which came after a bumper jobs gain and higher-than-expected inflation in February—could encourage the Fed to delay the start of rate cuts.
On monetary policy implications, DBS’ Taimur Baig said:
The March inflation print marked the third month in a row that prices pressures surprised on the upside, triggering a spike in US yields across the curve. […] clear signs of a high-pressure economy, characterised by strong growth and sticky inflation, is going to make it rather difficult for the Fed to (i) express comfort with the inflation trend and (ii) embark on a rate cut cycle any time soon. Our longstanding call has been rate cuts only in 2H24. That call remains intact, although the type of rate cuts plausible under the prevailing macro scenario is now mired in uncertainty.”