US inflation sees moderate rise in March, Fed interest rate cuts unlikely soon

In March, U.S. inflation saw a moderate increase but it is highly unlikely to alter financial markets’ hopes that the Federal Reserve will not cut off interest rates until September this year.

PCE price index

On Friday, the Commerce Department’s Bureau of Economic Analysis stated that the PCE price index increased 0.3% in March.

In the past year, inflation increased by 2.7% after progressing to 2.5% in February. Experts have predicted that the PCE price index would rise by 0.3% for the month and show a year-on-year increase of 2.6%. The PCE price index is an inflation measure monitored by the U.S. central bank to measure progress towards its target of 2%. A consistent monthly inflation rate of 0.2% is vital to keep its inflation within the target.

Inflation expectations

Concerns arose in March over inflation potentially crossing expectations following the release of the advance gross domestic product (GDP) report for Q1. There has been a significant increase in price pressures, particularly in service sectors like transportation, financial services, and insurance, making it the highest surge in a year. These surges result in a decline in the prices of goods.

Most of the inflation resurgence seems to have occurred in the first two months of 2024.

It is expected that the Federal Reserve officials will keep their interest levels at the current rate next week. Since July, the Federal Reserve has maintained its interest rate at 5.25%-5.50%. Since March 2022, it had increased its policy rate by 525 basis points.

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