Martin Baccardax

Originally Published: April 10, 2024 12:43 p.m.

U.S. inflation pressures quickened again last month, with core price pressures rising past Wall Street forecasts, a reading that will add further doubt to market bets on a June interest rate cut from the Federal Reserve.

The headline consumer price index for March was pegged by the Commerce Department at 3.5%, rising from the prior month's tally of 3.2% and coming in ahead of Wall Street's 3.4% consensus forecast.

On a monthly basis, inflation edged 0.4% higher, matching the 0.4% gain in February but also coming in ahead of Wall Street's 0.3% forecast.

So-called core inflation, which strips out volatile components like food and energy, held at 3.8%, the lowest in more two years but higher than Wall Street's 3.7% forecast. The monthly reading of 0.4% also topped Wall Street forecasts and matched the February reading.

The Fed tracks core inflation pressures as part of its price-stability mandate, and the year-on-year gains remain nearly double its preferred target of 2%.

U.S. stocks turned sharply lower following the data release, with futures tied to the S&P 500 indicating an opening bell decline of 54 points while those tied to the Dow suggest a 338-point slump. The Nasdaq is called 229 points lower.

Benchmark 10-year Treasury note yields surged 14 basis points (0.14 percentage point) following the data release to change hands at 4.487% while 2-year notes were pegged at 4.892%, around 10 basis points higher from prior to the data release.

Last week, the Labor Department said 303,000 new jobs were created over the month of March, a bigger-than-expected overall tally that spooked investors concerned about the impact of rising wages on inflation.

However, the report also noted that average hourly earnings growth was largely in line with Wall Street forecasts, giving rise to bets that the economy was absorbing the new hires without a corresponding spike in wage gains.

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The New York Fed's March survey of consumer sentiment, meanwhile, noted that while year-ahead inflation expectations remained stuck at 3%, Americans were hopeful for a modest easing of price pressures over the longer term.

CME Group's FedWatch now suggests only a 28% chance of a June rate cut, down from around 51% prior to the data release, with markets now reducing their overall tally for 2024 rate reductions to two from three.

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Inflation report hammers Fed rate cut bets, sends stocks sharply lower

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