White House, economists, traders react to inflation increase,

WASHINGTON — Consumer inflation remained persistently high last month, boosted by gas, rents, auto insurance and other items, the government said Wednes- day in a report that wi l likely give pause to the Federal Reserve as it considers how many — or even whether — to cut interest rates this year.

Prices outside the volatile food and energy categories rose 0.4% from February to March, the same acceler- ated pace as in the previous month. Measured from a year earlier, these core prices are up 3.8%, unchanged from the year-over-year rise in February. The Fed closely tracks core prices because they tend to provide a good read of where inflation is headed.

Wednesday’s figures rep- resent a disappointment for the White House. Republi- can critics of President Joe Biden have sought to pin the blame for high prices on the president and use it as a cudgel to derail his re-election bid. Polls show that despite a healthy job market, a near-record-high stock market and a decline inflation from its peak, many Americans blame Biden for high prices.

The March figures, the third straight month of infla- tion readings well above the Fed’s 2% target, provide con- cerning evidence that infla- tion is stuck at an elevated level after having steadily dropped in the second half of 2023. The latest numbers threaten to torpedo the pros- pect of multiple rate cuts this year. Fed officials have made clear that with the economy healthy, they’re in no rush to cut their benchmark rate despite their earlier projec- tions that they would do so three times this year.

The report “pours cold water on the view that the faster readings in January and February simply represented the start of new- year price increases that were not likely to persist,” Kathy Bostjancic, chief econ- omist at Nationwide, said in a research note. “The lack of moderation in inflation will undermine Fed officials’ con- fidence that inflation is on a sustainable course back to 2% and likely delays rate cuts to September at the earliest and could push off rate reductions to next year.”

On Wall Street, traders sent stock prices tumbling and bond yields rising. The S&P 500 dropped 0.9%, and the vast majority of stocks wi hin the index fell. The Dow Jones tumbled 422 points, or 1.1%, and the Nasdaq composite sank 0.8%.

Chair Jerome Powell has stressed that the Fed’s policy

ers need more confidence that inflation is steadily slowing to their target level before they will support a rate cut. Powell’s stance has elevated the profile of the monthly inflation data in determining when the Fed might start cutting rates. Lower rates would lead, over time, to reduced borrowing costs for businesses and consumers.

Overall consumer prices rose 0.4% from February to March, same as in the previous month. Compared with a year ago, prices rose 3.5%, up from a year-over-year figure of 3.2% in February.

The costs of owning a vehicle were a key reason why prices jumped last month: Auto insurance surged 2.6% in March and are up a dramatic 22% from a year ago.

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