US consumer prices fell for the first time in 10 months in March, weighed down by a decline in the cost of gasoline, but underlying inflation continued to firm amid rising prices for healthcare and rental accommodation.
The drop in the headline monthly inflation reading reported by the Labor Department on Wednesday is likely temporary as producer prices increased solidly in March.
In addition, the tightening labour market is expected to start generating significant wage inflation in the second half of the year. As such, many economists believe the Federal Reserve will raise interest rates three more times this year.
The US central bank increased borrowing costs last month and forecast at least two additional rate hikes in 2018.
"US inflation is warming up rather than heating up," said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. "Still, the upward trend could suffice to nudge the Fed three more times this year."
The Consumer Price Index slipped 0.1 percent last month, the first and largest drop since May 2017, after climbing 0.2 percent in February, the Labor Department said.
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