Hot US Inflation Reduces Bets on the Federal Reserve

Hot US Inflation Reduces Bets on the Federal Reserve

Wednesday 10th April 2024 – 13:55 (BST)

The US Bureau of Labor Statistics has released data showing that American consumer prices rose at a faster than expected pace in March, dashing hopes that the Federal Reserve will begin reducing its base interest rates as early as June. The latest Consumer Price Index (CPI) reading of 3.5% was above the 3.4% consensus and moved inflation further away from the US central banks 2% target.

Rising gas and rent prices were the primary contributors to the acceleration and accounted for over half the March increase alone. This leaves US inflation at its highest level since September 2023 and marked the third-consecutive month of unexpected gains.

GBP/USD and EUR/USD both moved 1% lower following the release of the data, with bets on the Federal Reserve reducing interest rates this summer now significantly diminished.

The news comes on the back of last week’s non-farm payrolls that showed the US added 303,000 jobs in March – well above market expectations and further easing the pressure on the Federal Reserve.