US CPI data showed evidence of broadening price pressures

US consumer prices rose 0.2% (m/m) in March, below expectations for 0.3%. Core CPI (excluding food and energy) was also up 0.2%, on par with the consensus call. Core goods accelerated for the second straight month, rising by 0.3% (from 0.2% in Feb). Core services gains were relatively widespread.

Beyond the headline, this report showed evidence of broadening price pressures. Core prices rose across most major categories. Core goods prices rose by the fastest rate since August 2011, reversing the relatively steep pace of declines at the end of 2014. 

"While we expect the rate of monthly increases to slow in the months ahead on pass through from the lofty dollar, core price inflation is likely to continue to move in the right direction from the Fed's perspective - that is, towards target." - TD Economics said in a report

With the weakness in inflation looking to be transitory, the job market remains the key metric to watch for clues on future monetary policy. There are still two more employment reports before the June meeting. The slowdown in broader economic data appears to have made an impact on job growth in March. 

"The case for a June rate hike has never been very strong in our opinion, but another weak job report would be the final nail in the coffin." adds TD Economics