Fed’s preferred inflation gauge shows price pressures stayed elevated last month

WASHINGTON — A measure of inflation closely tracked by the Federal Reserve remained uncomfortably high in March, likely reinforcing the Fed’s reluctance to cut interest rates anytime soon and underscoring a burden for President Joe Biden’s re-election bid.

Friday’s report from the government showed that prices rose 0.3% from February to March, the same as in the previous month. It was the third straight month that the index has run at a pace faster than is consistent with the Fed’s 2% inflation target. Measured from a year earlier, prices were up 2.7% in March, up from a 2.5% annual rise in February.

After peaking at 7.1% in 2022, the Fed’s favored inflation index steadily cooled for most of 2023. Yet so far this year, the index has remained stuck above the central bank’s target rate. More expensive gas and higher prices for restaurant meals, health care and auto repairs and insurance, among other items, have kept the overall pace of price increases elevated.

With new-car prices up sharply in the past few years, auto repair and replacement costs have risen especially fast. Auto insurance, a major driver of inflation in recent months, was up 8% in March from a year earlier.

Gas prices jumped again last month, the government said — up 1.6% just from February to March. So far in April, gas prices are up still further, to a national average of $3.66 a gallon, from $3.53 a month ago.

Grocery prices, though, were unchanged last month and are up only 1.5% from a year earlier.

“This isn’t going to sit overly well with the Fed,” said Ryan Sweet, chief U.S. economist at Oxford Economics. “I think it’s clear that they’re going to keep rates higher for longer.”

Like many economists, Sweet envisions no rate cuts before September.

Friday’s inflation data showed that excluding volatile food and energy costs, “core” prices rose by an elevated 0.3% from February to March, unchanged from the previous month. Compared with a year earlier, core prices rose 2.8% for a second straight month. The Fed closely tracks core prices, which tend to provide a particularly good read of where inflation is headed.

The chronically elevated measures of inflation have become a source of frustration for the Fed, whose policymakers had projected as recently as last month that they expected to cut their benchmark rate three times this year. Most economists expected the cuts to begin in June. More recently, though, several Fed officials, including Chair Jerome Powell ,…