The war against inflation was never going to be easy, but the latest consumer price index data demonstrates just how tough a fight the Federal Reserve is facing. In the months ahead, the outcome of that battle will have major implications for your finances.
The upshot: The Fed's ongoing campaign to tame inflation is far from over. That has left consumers and investors wondering if the central bank, who until recently were widely expected to cut its benchmark interest rate in June, could push back that timeline several months, or even into 2025.
Two main factors contributing to stronger-than-expected inflation in March were gasoline prices and rent. Rising prices at the pump stems partly to growing U.S. demand, according to the AAA, which said the current national average of $3.62 a gallon is about 6.6% higher than a month ago.
Hiking interest rates is the Fed's most effective weapon against inflation. That's because businesses and consumers put the brakes on spending when it costs more to borrow money, and that effectively dampens demand for goods and services, which in turn can help lower inflation.
But with inflation so far refusing to dissipate in 2024, economists say the Fed has less of a reason to cut rates, at least in the near term.
Prior to Wednesday's inflation report, most economists had penciled in the Fed's June 12 meeting as the likely date for its rate cut in four years. Economists had also predicted several cuts over the rest of 2024.
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