Federal Reserve’s Favorite Inflation Gauge Indicates Ongoing Rise in Prices

Today’s report on inflation may suggest that rate cuts by the Federal Reserve are less likely in the near future. The annual inflation rate rose to 2.7% in March, moving further from the Fed’s 2% goal. This data indicates that the Fed may not feel comfortable cutting rates at this time. In the past weeks, the Fed has already been trying to manage expectations for rate cuts due to higher-than-expected data in various areas.

Despite the higher-than-expected inflation rate, the Fed is not expected to change their fed funds rate at their upcoming meeting. Their communication post-meeting will be closely watched for clues about their future plans. The report on inflation follows other recent data that has made the Fed’s job more challenging as they navigate their monetary policy decisions.

The cost of living, as measured by the PCE index, increased by 0.3% in March, slightly above expectations. The yearly basis showed a 2.7% increase, higher than the 2% target set by the Federal Reserve. This acceleration from February’s 2.5% rate may influence the Fed’s decisions moving forward. The quarterly figure did not experience a drastic jump as some had predicted, which could be a relief to market watchers concerned about hidden inflation.