The month of March experienced a slight increase in annual inflation, with persistent strong underlying price pressures, according to the US Labor Department.

The consumer-price index (CPI) rose by 3.5 percent in March from a year earlier, being higher than what economists had predicted and an increase from February’s 3.2 percent. This particular CPI report attracted considerable attention from investors and economists due to the preceding months’ data showing higher inflation rates than anticipated, breaking from a trend of declining price increase rates.

Federal Reserve officials were willing to look past this downward trend as a fluke, but March’s figures disrupt that narrative. The Wall Street Journal suggests the expected cuts to interest rates could be pushed off until July or later in the year.

Despite these recent upticks, Federal Reserve officials have largely maintained their optimistic course towards their 2 percent inflation target, viewing these as minor setbacks rather than significant deviations. The new data did not “materially change” Federal Reserve Chair Jerome Powell’s view of the economy, he said last week.

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Last month, Powell said: “We’re in a situation where if we ease too much or too soon, we could see inflation come back, and if we ease too late, we could do unnecessary harm to employment […] We do see the risks as two-sided, so it is consequential [to begin cutting rates].”

This perspective has intensified focus on March’s CPI figures, with analysts suggesting that continued disappointing inflation data could prompt a reassessment of the Fed’s inflation outlook and policy adjustments.

The upcoming personal-consumption expenditures (PCE) price index, the Fed’s preferred inflation measure, will offer further insights into price trends, potentially showing a softer inflation scenario than the CPI suggests.

Regardless, public sentiment towards the cost of living remains critical, with consumer sentiment indexes reflecting ongoing concerns despite gradual improvements. About 74 percent of voters said inflation worsened in the last year, according to a recent WSJ poll. Additionally, certain interest rates not directly influenced by the Fed, like mortgage rates, have seen increases, contributing to the public’s inflationary worries.

Shane Devine is a writer covering politics and business for VT and a regular guest on The Unusual Suspects. Follow Shane’s work here.

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