Inflation just punched the market in the face. Is the Fed still cutting?
March CPI came in hot. Really hot.
U.S. consumer prices rose 0.9% month over month in March, the biggest monthly jump since mid-2022, with the 21.2% gasoline surge doing most of the damage as Middle East tensions pushed energy costs higher. Annual CPI moved up to 3.3%, still well above the Fed’s 2% target.
That is where things get messy.
On one side, this print makes the inflation story look uglier again. On the other, San Francisco Fed President Mary Daly said a rate cut is still possible if the oil shock fades and prices come back down. The message is basically this: if energy cools off fast, the Fed may look through some of this. If not, higher-for-longer gets louder.
For markets, April still looks like a near-certain hold. CME FedWatch continues to show only a very small chance of any easing at the next meeting, so traders are waiting for proof that disinflation is resuming before repricing cuts more aggressively.
This is why risk assets may stay jumpy. Hot CPI, oil uncertainty, and a Fed that still needs cleaner data is not a comfortable mix.
Do you think this was a one-off energy shock, or the start of another inflation leg higher?