US Inflation Rises Higher Than Expected, Impacting Global Markets

Consumer inflation in the United States exceeded expectations last month, driven by factors such as fuel and housing costs, according to a report released by the Department of Labor. The consumer price index rose by 0.4% from February, surpassing the 0.3% forecasted by Wall Street economists.

Global financial markets experienced a significant impact in response to the higher-than-expected inflation figures, with US government bond yields seeing a sharp rise and shares falling on Wall Street. Speculation arose that the Federal Reserve might delay cutting interest rates due to persistent inflationary pressures.

James Knightley, the chief international economist at Dutch ING bank, noted that expectations for a near-term Fed rate cut have diminished, potentially pushing any easing measures to a later date. Financial markets also shifted their projections for a possible rate cut by the Bank of England.

Inflation in the US, currently at 3.5% in March compared to a year earlier, has been resiliently above the Fed’s target rate of 2%. In the UK, where inflation has decreased from over 10% last year to 3.4% in February, upcoming figures are awaited with caution.

The latest data pointed to shelter and gasoline as key drivers of the March inflation rise. Gasoline prices jumped by 1.7% from the previous month and are 1.3% higher year-over-year. Shelter costs, up 5.7% from a year ago, rose by 0.4% over the month.

The Fed, which had raised its benchmark interest rate to over 5% in recent months, has been monitoring inflation closely in its efforts to maintain price stability and full employment. The robust job market in the US, with the addition of 15.2 million positions since President Joe Biden took office, has further complicated the rate-cut decision.

President Biden, facing criticism over economic stewardship and high inflation, addressed the latest data, acknowledging the need for continued efforts to lower costs for families. He called on corporations to utilize profits to reduce prices and criticized Republicans for their stance on taxes and price increases.

Former President Donald Trump, utilizing his social media platform Truth Social, voiced concerns over the inflation surge and criticized the Fed’s ability to lower interest rates, linking it to protecting President Biden.