US consumer prices jumped at the start of the year, dashing hopes for a continued drop in inflation and likely delaying any Federal Reserve interest-rate cuts.

The so-called core consumer price index, which excludes food and energy costs, increased 0.4% from December, more than expected and the most in eight months, according to government figures out Tuesday. From a year ago, it advanced 3.9%, the same as the prior month.

Economists favor the core gauge as a better indicator of underlying inflation than the overall CPI. That measure advanced 0.3% from December and 3.1% from a year ago.

The figures further reduce already-slim chances that Fed officials will start lowering interest rates soon, and any additional reacceleration might reignite talks that they will resume hikes. Some policymakers have said they want to see a broader easing of price pressures before cutting rates.

Stock futures dropped and Treasury yields jumped after the release. Traders shifted bets on a May rate cut to June instead and marked down March odds to almost zero.

The Bureau of Labor Statistics figures reflected increases in the price of food, car insurance and medical care. Shelter costs contributed to over two-thirds of the overall increase.

Last week, the BLS’s annual revisions confirmed inflation receded as fast as initially reported at the end of 2023. But new weightings — which are effective as of the January figures — will place a greater emphasis on services and less on goods, which economists say will slightly boost the outlook for the CPI this year.

Shelter prices, which is the largest category within services, advanced 0.6%, matching the most in nearly a year. Economists see a sustained moderation in this area as key to bringing core inflation down to the Fed’s target.

Excluding housing and energy, services prices climbed 0.8% from December, the most since April 2022, according to Bloomberg calculations. While policymakers have stressed the importance of looking at such a metric when assessing the nation’s inflation trajectory, they compute it based on a separate index.

That measure, known as the personal consumption expenditures price index, doesn’t put as much weight on shelter as the CPI does. That’s one reason why the PCE is trending much closer to the Fed’s 2% target.

Friday’s release of the producer price index will provide more clues, as several categories within that report feed directly into the PCE calculation. January PCE figures will be released later this month.

This article was provided by Bloomberg News.