Cracking into the latest financial trends, the U.S. inflation rate has slowed to its lowest level in nearly two years. However, core inflation remains as stubborn as an overcooked omelet, hinting that the Federal Reserve might whisk another interest-rate hike into the mix come May. 

Humpty Dumpty Had a Great Fall: Unscrambling the March Inflation Rates

The U.S. Department of Labor’s latest report reveals that the consumer price index, the everyday shopper’s basket tallying the costs of goods and services, experienced a modest 5% increase compared to last year – marking the tiniest climb since May 2021. From cheaper grocery and gasoline prices to more affordable medical care and utilities, the consumer’s wallet had a halt. Still, high costs for shelter, airline fares, and insurance refused to come down from their high roost.

The Hard-Boiled Reality of Core Inflation

Despite the drop, inflation remains well over the Fed’s 2% target, rising to a persistent high compared to the pre-pandemic average of 2.1%. Core inflation, a more reliable sous-chef predicting future inflation trends, continues to simmer at high heat, primarily driven by escalating shelter costs. 

Fed’s Rate Hike: A Sunny Side Up or Scrambled Outcome?

Fed officials might scramble to raise interest rates at their next meeting due to the still too-hot-to-handle inflation and a tight labor market. As the potential risk of a recession looms later this year, all eyes will be on economic indicators, including lending conditions, as Fed officials decide on their May move.

With the first drop in grocery prices since September 2020, March brought some relief, led by egg prices seeing the most significant single-month reduction since 1987. However, with the labor market cooling off and uncertainties around the economy’s trajectory, the real question is, will the Fed serve up another rate hike in May? As we poach into these uncertain times, the yolk’s on us to monitor these market trends closely.