US inflation increased more than expected in March; CPI climbed 3.5% annually

Investing.com -- Headline U.S. consumer price growth accelerated in March, but growth in the underlying measure remained unchanged, which could further increase the uncertainty surrounding the timing of potential Federal Reserve interest rate cuts this year.

The annualized reading of the closely-watched consumer price index increased by 3.5% last month, above the pace of 3.2% notched in February, and more than the 3.4% expected. The year-on-year core figure, which strips out volatile items like food and fuel, stayed at 3.8%.

Month-on-month, the overall consumer price index rose by 0.4% in March, staying at the 0.4% uptick seen last month, above the 0.3% expected. The core gauge also came in at 0.4%, above February's 0.3% growth.

Fed officials made easing inflation the major objective of a series of interest rate hikes that have brought borrowing costs up to more than two-decade highs.

They projected, at the last meeting in March, that the central bank would agree to 75 basis points of cuts this year, but have stressed that they first need to see more evidence that price growth is sustainably easing back down to their 2% annualized target.

Federal Reserve Governor Michelle Bowman, a known hawk, said last week it’s not time for the U.S. central bank to consider cutting its interest rate target and noted that more hikes could be on the table if progress on lowering inflation stalls out.

Dallas Federal Reserve President Lorie Logan also argued last week against any imminent push toward easier monetary policy by the U.S. central bank, saying she continues to be concerned about inflation, while Richmond Federal Reserve Bank President Thomas Barkin acknowledged Friday's payrolls release as a "quite strong jobs report."

That said, Chicago Federal Reserve President Austan Goolsbee said on Monday the U.S. central bank must weigh how much longer it can maintain its current interest rate stance without it damaging the economy.

Traders had priced in about 67-basis-point rate cuts by the Fed this year, according to LSEG data, before today's inflation report, down from about 150 bps anticipated at the start of the year.

U.S. stock futures retreated sharply following the data. Yields on the rate-sensitive 2-year Treasury bond and the benchmark 10-year note, which typically move inversely to prices, climbed.