Rate cuts may be delayed after consumer prices rise in America

United States – Consumer prices in the United States rose more than expected last March, amid increasing gasoline costs and home rents, prompting financial markets to expect that the Federal Reserve (the US central bank) would postpone cutting interest rates until September.

The strong consumer price readings for the third month in a row, announced by the Labor Department on Wednesday, came on the heels of news last week that job growth accelerated last month, with the unemployment rate falling to 3.8% from 3.9% last February.

Federal Reserve Chairman Jerome Powell has stated several times that the central bank is in no rush to start reducing borrowing costs.

“The data does not completely rule out the possibility of the Fed taking action this year, but it certainly reduces the chances of a rate cut,” said Philip Newhart, director of market research and economics at First Citizen.
Interest in the next two months.”

The Ministry of Labor Statistics Bureau stated that:

• The consumer price index rose 0.4% on a monthly basis following rising by the same percentage last February.
• Gasoline prices increased 1.7% following adding 3.8% in the previous month.
• Housing costs – which include rents – rose by regarding 0.4%, at the same pace as last February, and gasoline and housing rents accounted for more than half of the increase in the consumer price index.
• Food prices rose 0.1%.

The consumer price index rose 3.5% on an annual basis last March, the largest increase since September 2023, following rising 3.2% on an annual basis last February.

The US Central Bank aims to reach the inflation rate to 2%.

Economists polled by Reuters expected the consumer price index to rise 0.3% on a monthly basis, and 3.4% on an annual basis.

Shortly following the release of the data, financial markets changed their expectations for the first interest rate cut from June, according to previous estimates, to next September, according to the “Feed Watch” tool of the CME Group.

Markets currently expect only two interest rate cuts, although reserve officials expected three cuts last month.

A minority of economists believe that the chances of lowering interest rates are declining.

The US Central Bank has kept interest rates in the range of 5.25-5.50% since last July, following raising them by 525 basis points since March 2022.