Shelter Costs, Gas Drive Up Inflation In March

Figures released Wednesday by the Bureau of Labor Statistics (BLS) showing headline inflation rose 0.4% in March – the same rate of increase as for February – were met with a collective groan across the mortgage industry, the reacceleration of headline inflation pushing the likelihood of Federal Reserve interest rate cuts deeper into 2024.

The BLS’s March Consumer Price Index Report showed shelter costs were the primary driver of both headline and core inflation last month. The second main driver was gasoline prices. The two indexes contributed more than half of the monthly increase to the CPI for all items.

On a year-over-year basis, headline CPI grew 3.5% – a larger increase than the 3.2% annual increase in February – marking the third consecutive month of annual price growth re-acceleration.

“This data does not contain the economic justification the Fed needs to begin rate cuts anytime soon,” said Xander Snyder, senior economist at First American, commenting on the release. “After all, why cut rates if there is some indication of inflation reaccelerating? While there will be more data to digest, including the PPI print tomorrow and the PCE print later this month, today's CPI release makes it much less likely that the Fed cuts rates at its June meeting.”

The CPI measures the change in prices paid by consumers for goods and services, reflecting spending patterns for each of two population groups: all urban consumers and urban wage earners and clerical workers. The all urban consumer group represents more than 90% of the total U.S. population.