US inflation in March turned up, reducing expectations of Fed rate cut

The latest US inflation data appears to increase the likelihood of the Fed making its first rate cut, but not before the US presidential election in November.

People shop for goods at a supermarket in Glendale, California, USA on January 12, 2022. (Illustration photo: AFP/VNA)

On April 10, the US Department of Labor released data showing that the Consumer Price Index (CPI) in March increased more than expected. This may reduce investors' expectations that the US Federal Reserve (Fed - Central Bank) will soon lower interest rates.

Accordingly, in March 2024, the US CPI increased by 0.4% compared to the previous month, standing at 3.5%. Both of these levels were higher than experts' forecasts of 0.3% and 3.4%, respectively. Excluding food and energy, the core CPI also increased by 0.4% compared to the previous month and increased by 3.8% compared to the same period.

The Fed has raised its benchmark interest rate to a 23-year high in a bid to bring inflation back to its long-term target of 2%.

The latest US inflation data seems to increase the likelihood of the Fed making its first rate cut (after 11 rate hikes) but it will not happen until before the US presidential election in November.

In a statement the same day, President Joe Biden said the new report showed inflation had fallen more than 60% from its peak, but there was still much work to be done to reduce costs for American households.

Housing and grocery prices remain very high, even as household staples like milk and eggs are lower than they were a year ago.

Inflation is back at a higher rate than expected and the 2% target is clearly not being met, according to Greg McBride, a financial analyst at Bankrate. He said there is a good chance that the first rate cut will not be in June.

Earlier this month, Fed Chairman Jerome Powell said that the Fed's current high interest rates are working to curb inflation, warning that cutting rates too soon could have negative consequences for the US economy .

He also warned that the risk of adjusting interest rates too soon is that inflation will increase and it will be quite difficult to return./.

According to VNA

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