A measure of underlying US inflation topped forecasts for a third straight month, heralding a fresh wave of price pressures that will likely delay any Federal Reserve interest rate cuts until later in the year.

The so-called core consumer price index (CPI), which excludes food and energy costs, increased 0.4 per cent from February, according to government data out on April 10. From a year ago, it advanced 3.8 per cent, holding steady from the prior month.

Economists see the core gauge as a better indicator of underlying inflation than the overall CPI.

That measure climbed 0.4 per cent from the prior month and 3.5 per cent from a year ago, an acceleration from February that was boosted by higher energy prices, Bureau of Labour Statistics (BLS) figures showed.

The April 10 report adds to evidence that progress on taming inflation may be stalling, despite the Fed keeping interest rates at a two-decade high.

With a strong labour market still powering household demand, officials have been adamant that they would like to see more evidence that price pressures are sustainably cooling before lowering borrowing costs.

Treasury yields and the dollar jumped, while S&P 500 index futures tumbled. Swaps traders slashed the degree to which they see the Fed will cut rates in 2024.

Minutes from the Fed’s meeting in March will be released later on April 10.

“The sound you heard there was the door slamming on a June rate cut. That’s gone,” JPMorgan Asset Management chief global strategist David Kelly said on Bloomberg Television.

Core CPI over the past three months increased an annualised 4.5 per cent, the most since May.

Petrol and shelter accounted for more than half of the overall monthly advance, the BLS said. Costs for car insurance, medical care and apparel increased in the month, while prices for new and used cars fell.

Shelter prices, which is the largest category within services, rose 0.4 per cent for a second month. Owners’ equivalent rent – a subset of shelter, which is the biggest individual component of the CPI – climbed by that much as well.

Excluding housing and energy, services prices accelerated to 4.8 per cent from a year ago, the most since April 2023, according to Bloomberg calculations.

While central bankers have stressed the importance of looking at such a metric when assessing the nation’s inflation trajectory, they compute it based on a separate index.

That measure, known as the personal consumption expenditures (PCE) price index, does not put as much weight on shelter as the CPI does. That is part of the reason the PCE is trending much closer to the Fed’s 2 per cent target.

Policymakers will have access to one more PCE report, as well as another look at the producer price index, before their next policy meeting concludes on May 1. Fed officials have effectively ruled out a rate cut then.

Charles Schwab chief fixed-income strategist Kathy Jones said: “Even though the Fed doesn’t target CPI, it is another reason for delaying any rate cuts or reducing the number expected this year.

“If service sector inflation is sticky, then it doesn’t leave much room to ease.”

Unlike services, a sustained decline in the price of goods over most of the past year has largely been providing some relief to consumers – though economists expect that to be a less reliable source of disinflation going forward.

So-called core goods prices, which exclude food and energy commodities, fell 0.2 per cent in the month.

With energy prices also back on the rise, it is unclear where the next big drag on inflation will come from. Economists have long been anticipating some easing in shelter price growth, but so far that has not really happened.

Policymakers have also been hesitant to cut interest rates given the strength of the labour market, especially after last week’s jobs report showed robust hiring and the unemployment rate fell.

A separate report on April 10 showed real earnings growth decelerated, rising at the slowest annual pace since May. That helps explain why President Joe Biden’s approval ratings are struggling for momentum going into the presidential election in 2024. BLOOMBERG