Breaking down yesterday’s inflation report

Prices are like a cat in a tree that refuses to come down – staying stubbornly high.

US inflation rose 0.4% month-over-month and 3.5% over the prior year in March, according to the latest Consumer Price Index. Both measures came in ahead of economists’ estimates of a 0.3% monthly increase and a 3.4% annual increase.

• For context, inflation rose 0.4% month-over-month and 3.2% annually in February.

Pretty much everything is still going up

Shelter and energy costs contributed to more than half of March’s monthly increase, but prices rose pretty much across the board. Outside of fuel oil, used and new cars (both falling), and grocery store food (staying flat), nearly every other major category saw a price jump.

And when it comes to core inflation, which excludes often-volatile food and energy costs, the US economy hasn’t been doing its sit-ups. Core inflation rose 0.4% month-over-month, bringing the annual rate to 3.8%, the same as in February.

👀 Looking ahead… Following the CPI’s release, the markets’ probability of a June rate cut sank to 21%, down from 53% on Tuesday and 73% last month, according to CME’s FedWatch tool. Investors now anticipate two 0.25% cuts from the Fed this year, down from six cuts expected at the start of the year.