In a surprising turn, US inflation accelerated beyond expectations in March, reaching 3.5 percent, signaling a setback in efforts to contain rising prices and potentially delaying planned interest rate cuts. This development is particularly worrisome for emerging markets, as lower US interest rates are crucial to attract foreign portfolio investors.
According to the US Labor Department’s Consumer Price Index report, prices surged from 3.2 percent in February to 3.5 percent in March, with a monthly increase of 0.4 percent, surpassing the anticipated 0.3 percent rise. The consistent trend of inflation exceeding forecasts for the third consecutive month is attributed to higher costs across various sectors including fuel, housing, dining out, and clothing.
Analysts caution that the persistent challenge of taming price hikes may compel the US central bank to maintain higher interest rates for a prolonged period. The Federal Reserve’s key interest rate is currently at its highest level in over two decades, ranging between 5.25 percent to 5.5 percent, reflecting the urgency to address inflationary pressures.
Source: Business Day