Courtesy Adobe Stock/sdecoret
sdecoret Courtesy Adobe Stock/sdecoret

Following a strong jobs report last week, stronger-than-expected inflation data for March means the Federal Reserve is unlikely to cut interest rates at its June meeting.

The Consumer Price Index (CPI) increased 0.4% in March on a seasonally adjusted basis, the same increase as February, according to the U.S. Bureau of Labor Statistics (BLS). Over the past 12 months, inflation has increased 3.5%, well above the Fed’s stated goal of 2% annual inflation.

“[The Fed] is saying we are not in a hurry to cut rates, but by being data dependent, things could change in the next month or two. It really hinges on what the jobs market numbers bring and what the next few inflation numbers bring,” Joel Kan, vice president and deputy chief economist for the Mortgage Bankers Association, told BUILDER when discussing the possibility of Fed rate cut activity in 2024.

“We are in April now, and, if we are thinking of a rate cut coming in June, there are only a few data points between now and then,” Kan continued.

The index for shelter and gas both rose in March, contributing over half of the monthly increase in the index for all items.

The index for all items less food and energy rose 0.4% in March, consistent with both January and February. According to the BLS, the shelter index—which increased 0.4% in March—was the largest factor in the monthly index for all items less food and energy.

The index for all items less food and energy rose 3.8% over the past 12 months. The shelter index increased 5.7% over the last year, accounting for over 60% of the total 12-month increase, according to the BLS. Other indexes with notable 12-month increases include motor vehicle insurance (+22.2%), medical care (+2.2%), recreation (+1.8%), and personal care (+4.2%).

The inflation data follows a strong jobs report, in which the economy added 303,000. Additionally, the unemployment rate—3.8%—remained within the narrow range of 3.7% to 3.9%, as it has since August 2023.

“The Federal Reserve has told us for years that they are data dependent. This means they won’t make any kind of policy change without seeing backing data to support a move,” Zonda chief economist Ali Wolf said following the jobs report. “Over the past couple of months, we received higher-than-expected reads on both inflation and the labor market. While our belief holds that the Fed should cut short-term interest rates later in the year, the latest data tells us we are still a ways off. “