US inflation is rising in line with expectations in March

WASHINGTON (Reuters) – U.S. inflation rose moderately in March, but that is unlikely to change financial markets' expectations that the Federal Reserve will delay interest rate cuts until September.

The personal consumption expenditures (PCE) price index rose 0.3% last month, the Commerce Department's Bureau of Economic Analysis said Friday. The data for February has not been revised, showing that the PCE price index rose 0.3%, as previously reported.

In the 12 months to March, inflation rose by 2.7%, after rising 2.5% in February. Economists polled by Reuters had forecast the PCE price index would rise 0.3% this month and rise 2.6% year-on-year. The PCE price index is one of the inflation measures that the US central bank tracks for its 2% target. Monthly inflation rates of 0.2% over time are needed to bring inflation back to target.

In March, there were fears that inflation could exceed expectations after Thursday's advance report on first-quarter gross domestic product (GDP) showed that price pressures had increased the most in a year, driven by rising costs for services, especially transport, financial services and insurance. These more than compensated for a drop in commodity prices.

Most of the rebound in inflation appears to have occurred in the first two months of the year.

Fed officials are expected to leave rates unchanged next week. The central bank has kept its benchmark interest rate in the range of 5.25%-5.50% since July. Since March 2022, the country has increased the policy rate by 525 basis points.

Financial markets initially expected the first rate cut to take place in March, but it was subsequently postponed to June and now to September as labor market and inflation data continued to surprise on the upside this year.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)

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