US inflation accelerates to 3.5pc pace in March

The US consumer price index (CPI) accelerated to a 3.5pc annual pace in March, a sign the Federal Reserve is likely to hold its target lending rate at a 23-year high for longer in order to slow inflation to its long-range goal.

The CPI rose from a 3.2pc rate in February and was the highest since it reached 3.7pc in September, the Bureau of Labor Statistics reported today. So called core CPI, which strips out food and energy, rose at a 3.8pc rate, unchanged from the prior month. Food rose at a 2.2pc rate and energy rose at a 2.1pc pace. Shelter rose at a 5.7pc annual rate.

The CPI report reduced the probability that the US Federal Reserve will begin cutting its target rate at its June meeting to less than 20pc, futures markets showed on Wednesday, down from a greater than 57pc probability on Tuesday. The Fed last week signaled it was in no hurry to begin cutting borrowing costs amid stronger than expected economic data, even as it also suggested most members did expect cuts to begin later this year.

On a monthly basis, CPI rose by 0.4pc for a second month and core CPI rose by 0.4pc for a third month. Food rose by 0.1pc on the month and energy rose by 1.1pc, with gasoline up 1.7pc. The shelter index and gasoline index accounted for 50pc of the monthly gain in the headline CPI index, the bureau said.

By Bob Willis