Rising consumer prices show inflation heading in the wrong direction. What next?

The core rate of inflation, meanwhile, also increased 0.4% in March to leave the yearly rate unchanged at 3.8%. The core rate omits food and energy and is seen as a better predictor of future inflation trends.

Federal Reserve leaders have signaled they want to see the rate of inflation slow toward their 2% goal before they cut interest rates. The Fed jacked up rates in 2022 and 2023 to try to extinguish high inflation.

The Fed prefers a different inflation gauge known as the PCE index that is running a bit below 3%, but the central bank can’t ignore the better known consumer price index.

The details of the CPI, what’s more, don’t offer much encouragement about the short-run path of inflation.

Two key categories, housing and services, aren’t showing much progress — and they might even be getting worse.

Let’s start with housing or shelter, which represents one-third of the entire CPI.

The cost of rent rose 0.4% in March after 0.5% and 0.4% gains in the first two months of the year.

In normal times, rents tend to rise just under 0.2% a month.

Economists and Fed officials have been predicting for months that rent increases would slow based on other private-market measures.

The yearly increase in rent has indeed slowed to 5.7% in the past 12 months from a 40-year peak of 8.8% one year earlier.  But progress has almost ground to a a halt in 2024. And rents are still rising twice as fast as they usually do.

A more controversial measure known as owner equivalent rent also rose 0.4% in March following large gains in February in January. This measure is designed to figure out how much the cost of home ownership rises each month.

Critics of how the CPI measures the cost of shelter insist prices will continue to slow, but that it will take awhile to show up in the index. The CPI’s shelter index tends to lag private-market measures by up to a year or more.

Not everyone is convinced. Rents appear to be creeping back up and housing prices have also resumed an upward march.

“Both ApartmentList and Zillow measures of market rates have rebounded in recent months, which suggests that any lagged disinflation that we see in rents will likely be short-lived,” contended U.S. economist Thomas Simons of Jefferies.

Another price gauge closely monitored by the Fed is the so-called supercore rate of service inflation. It’s also flashing a warning sign.

Supercore inflation rose 0.7% in March to push the yearly increase up to 4.8% from 4.4%. That’s the highest level in 11 months.

This measure strips out energy and housing and is seen as a proxy for labor costs, the single biggest expense for service companies such as hotels, hospitals, banks, retailers and the like.

The Fed has been worried about employee costs because of a tight labor market in which wages have risen much more rapidly than usual.

Senior officials such as Chairman Jerome Powell began to point to the supercore number last year as a good gauge to determine if inflation was slowing as expected.

Well, the progress has stalled for now.

“This metric is heading the wrong way and quite quickly at that,” said Brian Coulton, chief economist at Fitch.

The recent upturn in inflation has lowered the odds of an expected Fed rate cut in June, but the central bank will see two more monthly inflation reports before its June meeting.