The consumer price index increased at a faster than expected pace in March, indicating that inflation is staying stubbornly higher and likely keeping the Federal Reserve on hold with interest rates.
The CPI, a broad measure of goods and services costs across the economy, rose 0.4% for the month, putting the 12-month inflation rate at 3.5%. Economists surveyed by Dow Jones had been looking for a 0.3% gain and a 3.4% year-over-year level.
Excluding volatile food and energy components, core CPI also accelerated 0.4% on a monthly basis while rising 3.8% from a year ago, compared to respective estimates for 0.3% and 3.7%.
The report comes with markets on edge and Fed officials expressing caution about the near-term direction for monetary policy. Central bank policymakers have repeated calls for patience on cutting rates, saying they have not seen enough evidence that inflation is on a solid path back to their 2% annual goal.
Markets currently expect the Fed to start cutting interest rates in June with three reductions in total expected this year, according to futures market pricing. Later Wednesday, the Fed will release minutes from its March meeting, providing more insight into where officials stand on monetary policy.
Stock market futures slumped following the report while Treasury yields spiked higher.
The Fed also expects services inflation to ease through the year, but that has shown to be stubborn as well. Excluding energy, the services index increased 0.5% in March and was at a 5.4% annual rate, inconsistent with the Fed’s target.
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