The consumer price index is a vital gauge of inflation. It’s a guiding light for economists and investors who anxiously await an easing of interest rates from the Federal Reserve. Last week’s shockingly hot jobs report put even more weight upon the upcoming release of March’s CPI numbers. Here are five things to expect from the Bureau of Labor Statistic’s report.

An increasingly bumpy path

Economists predict a minor decline from last month’s core CPI number – which strips out volatile goods like food and energy – and headline increase from 3.2% to 3.4%. These predictions continue a trend of solid economic growth in 2024 and modest cooling in core goods and services. Jerome Powell, chair of the Federal Reserve, put it best when he described the road to decreasing inflation as a “bumpy path.” Both January and February prices came in hotter than economists predicted. Part of that could be typical start-of-year price adjustments, but those are supposed to settle down by March. Tomorrow’s report would make three hot months in a row, and three makes a trend.

Cooling core prices, with some exceptions

Problems at U.S. oil refineries spiked energy prices in February. Economists expect those fluctuations to continue pushing up CPI for March, but at a slower pace. Once energy and food are stripped out, core CPI shows signs of promise. Transportation is expected to pull down the core number, as March saw falling airfare and car prices, as well as slowing apparel prices. However, as has been the case in recent months, slowing inflation is an uneven process. Core categories like hotel stays and motor vehicle insurance are expected to surge.

Elevated shelter costs

Ever since runaway commodity prices like food got under control, the services sector has been in the hot seat. Volatile shelter costs, in particular, are causing economists headaches. Economists once again expect owner’s equivalent rent to continue its upward pace.

A bad omen for rate cuts

If March prices come in as hot as expected, then markets may abandon hopes of interest rate cuts this summer. Although the Fed indicated that there would be three cuts in 2024, markets have continually pushed back their timelines from March, to May and to June. Now, there’s even talk about September. Economists say that a June rate cut would require much more modest growth in prices than previously seen. It’s clear that the Fed has far more patient than investors. After all, why should the Fed be in any rush? The recent jobs report blew economist predictions out of the water with a reported increase in jobs of 303,000 and declining unemployment. A majority of evidence –  including predictions for March CPI numbers – points to a strong economy.

Inflation as a persistent problem for businesses and consumers

Optimism among small businesses in the U.S. declined in March, largely due to inflation, according to a report by Scotiabank. The percentage of firms surveyed as a part of the National Federation of Independent Small Businesses that said inflation is their single biggest problem was at the highest level since May 2023. According to Steven Miller, who leads the Center for Economic Analysis at Michigan State University, consumers are feeling inflation the most within the housing market. “When they look at the economy, they see an economy that doesn’t work for them,” Miller said.

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