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Published: Apr 11, 2024 6 min read

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The latest inflation data was a setback for hopes of an interest rate cut at the Federal Reserve’s June meeting.

Analysts at major banks changed their forecasts for the timing of interest rate cuts after the March consumer price index (CPI) report showed inflation accelerated to an annual rate of 3.5%.

The hot CPI reading was driven by cost increases in March for things including car insurance and medical care. Meanwhile, increases in shelter prices accounted for more than 60% of overall annual inflation.

The Fed uses interest rate hikes as a means of slowing the economy to battle inflation, and it is likely to lower rates only when inflation is in check. Previously, many on Wall Street were expecting three quarter-point interest rate cuts in 2024, and that aligned with the most recent projections from Fed officials released on March 20. Now, optimism is waning in terms of how soon Fed will cut interest rates will be cut, as well as how many cuts there will be this year.

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