The U.S. Consumer Price Index (CPI) rose 3.5 percent in March, a gain higher than expected and a signal that inflation is once again accelerating.
Increases in housing and fuel costs contributed more than half of the monthly inflation increase, according to the latest report from the Bureau of Labor Statistics (BLS).
The increase was larger than the 3.2 percent increase for the 12 months ending in February.
Over the past year, the energy index has increased 2.1 percent, with gasoline costs rising 1.3 percent, and electricity costs surging five percent.
Stocks tumbled following the release of the bad economic data, with the Dow Jones Industrial Average falling more than 450 points.
In recent months, there had been discussion about as many as three rate cuts from the Federal Reserve starting in June. However, after back-t0-back economic reports showing rising inflation, analysts now doubt the Fed will ease rates anytime soon, with some predicting no rate cuts until at least September.
“There’s not much you can point to that this is going to result in a shift away from the hawkish bent” from Fed officials, Liz Ann Sonders, chief investment strategist at Charles Schwab, told CNBC. “June to me is definitively off the table.”
Even if inflation were to lower on next month’s report, because of the new upward trend the Fed would unlikely be bullish on rate cuts in the upcoming months, some market watchers predict.
″This marks the third consecutive strong reading and means that the stalled disinflationary narrative can no longer be called a blip,” Seema Shah, chief global strategist at Principal Asset Management, said in a note quoted by CNBC. “In fact, even if inflation were to cool next month to a more comfortable reading, there is likely sufficient caution within the Fed now to mean that a July cut may also be a stretch, by which point the US election will begin to intrude with Fed decision making.”
Others are even less optimistic, saying the chances of a rate cut are completely off the table.
"You can kiss a June rate cut goodbye," Greg McBride, Bankrate's chief financial analyst, said on Wednesday. "There is no improvement here, we're moving in the wrong direction.”
The latest BLS report comes just one day after former White House chief of staff Ron Klain blasted President Joe Biden for being too focused on infrastructure projects and not doing enough to address Americans’ economic needs.
“I think the president is out there too much talking about bridges,” Klain said, according to audio obtained by POLITICO. “He does two or three events a week where he’s cutting a ribbon on a bridge. And here’s a bridge. Like I tell you, if you go into the grocery store, you go to the grocery store and, you know, eggs and milk are expensive, the fact that there’s a fucking bridge is not [inaudible].”
Klain added that infrastructure projects are “a positive thing,” but said Biden is focusing too heavily on it.
“He’s not a congressman. He’s not running for Congress,” said Klain. “I think it’s kind of a fool’s errand. I think that [it] also doesn’t get covered that much because, look, it’s a fucking bridge. Like it’s a bridge, and how interesting is the bridge? It’s a little interesting but it’s not a lot interesting.”
