Inflation Rises More Than Expected To 3.5% In March, Derails June Rate Cut Hopes

NEW YORK (April 10) Inflation in the United States surged again in March, surpassing economist expectations and disappointing investors who were anticipating imminent cuts in Federal Reserve interest rates.

According to Wednesday’s report from the Bureau of Labor Statistics, the annual inflation rate calculated on the Consumer Price Index (CPI) rose to 3.5% last month.

March Inflation Report: Key Figures

• The annual CPI inflation rate surged from 3.2% in February to 3.5% in March 2024, marking the second consecutive month of increase and exceeding expectations of a 3.4% surge.
• On a monthly basis, the CPI advanced at a pace of 0.4%, maintaining the momentum from the previous month and surpassing forecasts of 0.3%.
• The index for gasoline spiked by 1.7% on a monthly basis. On an annual basis, gasoline costs were 1.3% lower, sharply rising from the 3.9% drop in February.
• Excluding food and energy costs, the core CPI inflation rate came in at 3.7% year-on-year, slightly easing from the 3.8% rate in February, in line with expectations.
• On a monthly basis, core CPI advanced at a pace of 0.4%, matching the 0.4% seen in February, but above estimates of 0.3%.

Market Reactions

Ahead of the inflation report, investors had priced in a 54% likelihood of a Federal Reserve interest rate cut in June.

The hotter-than-expected March inflation report may now dampen these expectations further as policymakers are likely to lean towards keeping high interest rates for longer to counteract the renewed inflationary pressures.

Minutes after the release, Treasury yields spiked, with the 2-year Treasury note yield surging by 9 basis points to 4.82%, on track to close at its highest level since late November 2023.

The U.S. dollar index (DXY), as tracked by the Invesco DB USD Index Bullish Fund ETF 

UUP, strengthened 0.4%, backed by rising expectations of a delay in interest rate cuts.

Gold, as monitored through the SPDR Gold Trust 

GLD, fell 0.7%

Futures on major U.S. indices traded lower during the premarket trading Wednesday, with tech underperforming the broader market. The Nasdaq 100 was 0.8% lower at 08:35 a.m. in New York.

Benzinga