U.S. consumer inflation rises more than expected in March

The annual consumer inflation rate accelerated for a second straight month to 3.5% in March from 3.2% in February, above market forecasts of 3.4%. Higher costs for shelter and gasoline contributed over half of the monthly increase. Core inflation, which excludes changes in food and energy costs, remained at 3.8%.

Food prices increased 2.2% from year-ago, with food at home (grocery) prices up 1.2% and food away from home (restaurant) prices up 4.2%.

The energy index increased 2.1% over the past 12 months. The gasoline index rose 1.3% and the electricity index increased 5.0% annually.

The U.S. dollar surged in reaction to the stronger-than-expected increase in inflation as traders now see the Fed sticking with higher interest rates for longer. Fed fund futures now reflect less than 50% odds the Fed will start cutting interest rates in June. The highest odds are now for the first rate cut in September, with two reductions now expected this year instead of three.