- US inflation rose to 3.5% in March, higher than expectations
- The increase diminishes anticipation for interest rate cuts from the Federal Reserve
- All eyes are now on remarks from Fed Chair Jerome Powell regarding the direction of interest rates
The US Bureau of Labor Statistics has reported that inflation rose to 3.5% in March, exceeding expectations and reducing the chance of interest rate cuts from the Federal Reserve.
Inflation Increases Again, Reaching 3.5%
The inflation rate for March came in at 3.5%, higher than anticipated. This follows increases over the past two months, with inflation hitting 3.2% in February and 3.1% in January. The 3.5% figure is the highest reported since December 2022 when it was 3.4%.
The rise in inflation will likely impact the Federal Reserve’s plans for interest rate cuts this year. Fed Chair Jerome Powell had previously indicated there could be three rate cuts in 2024, but expectations for those cuts have now fallen given the continued inflationary pressure.
Market Awaited Interest Rate Cuts from the Fed
Markets had been anticipating rate cuts from the Fed after some positive economic developments in recent months. However, with inflation picking up again, those expectations have diminished significantly.
All eyes will now turn to Fed Chair Powell for guidance on the central bank’s next steps. Markets hope to gain insight into whether the Fed still plans to move forward with rate cuts this year or if it will take a more hawkish turn given the hotter than expected inflation data.
Conclusion
The higher than expected rise in US inflation for March has dealt a blow to hopes for Federal Reserve interest rate cuts. It remains to be seen how the Fed will react, but markets are bracing for the possibility of a more aggressive stance on rates given the continued inflationary pressures.
