Investing.com - While U.S. consumer price inflation accelerated in March, the month-on-month reading registered a surprise decline, according to data released on Wednesday.
Consumer inflation rose by an annualized 2.4% in March the Labor Department said, up from 2.2% in the previous month. The reading matched the consensus forecast.
Although markets have been focusing lately on headlines related to the trade dispute between the U.S. and China, inflation remains a concern as increasing price pressures would be a catalyst to push the Fed toward raising interest rates at a faster pace than currently forecast.
Markets widely expect the next rate hike to arrive in June and forecast a third increase to be implemented by the end of the year, according to Investing.com’s Fed Rate Monitor Tool.
However, some policymakers, including former Fed chair Janet Yellen, have suggested that a total of four hikes in 2018 could be appropriate.
Month-on-month, CPI fell 0.1%, below the consensus forecast that the reading would show no change.
Core CPI, a key gauge of underlying consumer price pressures that excludes food and energy costs, increased by 0.2% from a month earlier, in line with the consensus forecast.
In the 12 months through March, core CPI rose 2.1% in March. That matched the consensus forecast although it was higher than the previous month’s 1.8% increase.
Core prices are viewed by the Federal Reserve as a better gauge of longer-term inflationary pressure precisely because they exclude the volatile food and energy categories. The central bank usually tries to aim for 2% core inflation or less.
Market participants will also be keeping a close eye on the publication, at 2:00PM ET (18:00GMT) Wednesday, of the minutes from the last Fed policy decision in March to see the level of discussion surrounding the possibility of a slightly swifter move up in interest rates.