U.S. consumer prices increased more than expected in March as Americans continued to pay more for gasoline and rental housing, leading financial markets to anticipate that the Federal Reserve would delay cutting interest rates until September.
The third straight month of strong consumer price readings reported by the Labor Department on Wednesday also suggested that the pick up in inflation in January and February could not be solely attributed to businesses raising prices at the start of the year as economists had argued.
The report followed news last week that
job growth accelerated in March, with the unemployment rate slipping to 3.8% from 3.9% in February. The stubbornly higher cost of living looms large over the Nov. 5 presidential election. Still, there were some silver linings, with food prices at the supermarket unchanged and the cost of motor vehicles declining, leading to the return of goods deflation.
"The data does not completely remove the possibility of Fed action this year, but it certainly lessens the chances the Fed is cutting the overnight rate in the next couple months," said Phillip Neuhart, director of market and economic research at First Citizens.
The consumer price index rose 0.4% last month after advancing by the same margin in February, the Labor Department's Bureau of Labor Statistics said. Gasoline prices climbed 1.7% after increasing 3.8% in February. Shelter costs, which include rents, rose 0.4%, matching February's gain.
