Some good news on inflation? Fed might get it with the CPI.

By Jeffry Bartash

Price pressures may have eased a bit in March

A roaring labor market and high inflation readings early this year have cast doubt on the Federal Reserve cutting interest rates soon, but the March report on consumer prices due on Wednesday might offer a ray of hope.

The consumer price index is expected to rise 0.3% for March, according to economists polled by The Wall Street Journal.

Such a reading is by no means great news - the Fed would prefer monthly increases of 0.1% to 0.2%. Yet it would show some progress after a 0.4% increase in February that was the largest in five months.

The 12-month increase in the CPI would likely creep up to 3.5% from 3.2%.

Economists predict the core CPI will rise 0.3% in March after back-to-back gains of 0.4% in January and February.

But it's a close call: Many forecasters predict a smaller 0.2% gain.

The core rate is viewed by the Fed as a better predictor of future inflation because it strips out food and gas, categories that can prone to big short-term swings.

The increase in core rate in the 12 months ended in March is expected to slow to 3.7% from 3.8% - still far from the Fed's 2% inflation goal.

Wall Street will also be watching to see if the cost of shelter - the biggest driver of inflation - begins to wane.

Service prices are another cue as to future inflation. They rose sharply in the first two months of the year but are expected to settle down in March.

A more benign March CPI, if it materializes, could keep the Fed on track to cut U.S. interest rates as early as June.

Also on tap in the upcoming week are the minutes of the Fed's March meeting on interest rates and the producer price report for March on Thursday.

The minutes will give investors a better sense of how the Fed was contemplating rate cuts at its last decision, though the meeting has somewhat been overtaken by events.

The producer price index is gauge of wholesale inflation. Prices tend to rise at the wholesale level before filtering through to consumers.

Wholesale prices tapered off sharply toward the end of 2023 before turning higher again early in 2024.

Forecasters also expect a 0.3% reading in the PPI in March.

-Jeffry Bartash

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04-06-24 0701ET

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