Hot US inflation data dents rate cut hopes

Wall Street battered as investors turn risk averse; bond yields rise

US consumer prices increased more than expected in March amid rises in the costs of gasoline and shelter, casting further doubt on whether the Federal Reserve will start cutting interest rates in June.

The consumer price index rose 0.4 per cent last month after advancing by the same margin in February, the Labor Department’s Bureau of Labor Statistics (BLS) said on Wednesday.

Gasoline and shelter costs, which include rents, accounted for more than half of the increase in the consumer price index (CPI).

In the 12 months through March, the CPI increased 3.5 per cent also as last year’s low reading dropped out of the calculation. That followed a 3.2 per cent rise in February.

The US central bank has a 2 per cent inflation target. The measures it tracks for monetary policy are running considerably below the CPI rate.

Economists polled by Reuters had forecast the CPI gaining 0.3 per cent on the month and advancing 3.4 per cent on a year-on-year basis.

Though the annual increase in consumer prices has declined from a peak of 9.1 per cent in June 2022, the disinflationary trend has slowed in recent months.

Fed Chair Jerome Powell has repeatedly said that the US central bank is in no rush to start lowering borrowing costs.

Wall Street’s main stock indices tumbled on Wednesday as investors turned risk averse after the stronger-than-anticipated inflation reading doused hopes of the Federal Reserve kicking off its monetary easing cycle in June.yields across government bonds spiked after the data was released, with the 10-year note climbing back to 4.5008 per cent — its highest level since last November. The Dow Jones Industrial Average was down about 1.3 per cent, while the S&P 500 and the Nasdaq Composite were down about 1.1 per cent in early trade.