What March inflation data could inform us about Fed rates

Inflation rose hotter than expected in March as represented in the month's Consumer Price Index (CPI) reading. With inflation data now playing a heavier role than ever as Federal Reserve officials seek to scrutinize and look for cues from economic prints, how will this affect plans for interest rate cuts?

Yahoo Finance Senior Reporter Alexandra Canal joins the Morning Brief to analyze the new sentiment around rate cuts as the Fed could hold rates higher for longer and push cuts farther down the line in 2024.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

Editor's note: This article was written by Luke Carberry Mogan.

Video Transcript

- Well, today's top story, US stock futures selling off on this hotter than expected March inflation prints. The headline number rising 3 and 1/2% over the prior year. The acceleration from February's 3.2% annual gain in prices. Joining us now on this, we've got our very own Alexandra Canal. Hey, Ale.

ALEXANDRA CANAL: Hi, guys. Yeah, so it looks like just like the Fed officials have been telling us, the path down to 2%, it's going to continue to be bumpy. Inflation coming in hotter than expected across the board. We were just talking about our interview with Raphael Bostic. He said, if inflation came in at consensus, that would be welcome news. That did not happen here. We saw higher than expected inflation in really key areas like shelter, gas, food, food at home. These are all areas that consumers, you know, feel day in and day out.

When it comes to the future path of interest rates, it looks like that could very well be pushed out. According to Fed Futures, just 20% are now anticipating a cut in June. That's down from about 60% that we saw yesterday. It looks like according to this data that we might not get the first cut until September. We know that Raphael Bostic, he said he expects one cut in the fourth quarter. We'll see if that continues to change here, guys.

But all in all, it looks like this is a complicated space for the Fed to be in as they navigate interest rate cuts, as they navigate when and how many cuts they should commit to. But clearly, this data along with that hotter than expected jobs report that we got recently too, it's not great news for the Fed when it comes to the clarity of what they should be doing.

- Certainly not. And it's a very tough job that Powell and his team have in front of him, that is for sure.