Whoops!

It's the increase in core rate that surprised 'em. Reuters (04.20.05):

"Another surge in energy prices helped push U.S. underlying inflation up at the sharpest rate in 2-1/2 years during March, the Labor Department said on Wednesday in a report that rocked financial markets. The Consumer Price Index, widely used as a major gauge of inflation, was up 0.6 percent last month -- the sharpest monthly gain since October -- following a 0.4 percent rise in February." Consumer Prices Up More Than Expected

"(T)he so-called core rate...strips out volatile food and energy costs...." It jumped 0.4% in March, "the biggest monthly increase in core inflation since a matching 0.4 percent jump in August 2002...". It was up 0.3% in February. This indicates "a broad-based pickup in the prices (of) many things, including food, gasoline, clothing, medical care and airline fares." Not quite ready for a half-point yet? Bloomberg (04.20.05):

"The increase in core inflation suggests companies were able to pass along higher costs for fuel and materials to consumers. Federal Reserve officials said last month that they've seen greater evidence of pricing power. Central bankers still are likely to confine rate increases to quarter-point steps, economists said after today's report. 'You still see some increases in inflation, but it's still not enough to be a major concern at this point,' Glenn Haberbush, an economist at Mizuho Securities USA in Hoboken, New Jersey, said. 'I don't think it rocks the boat back to expecting 50-basis-point increases.'" U.S. March Consumer Prices Rise 0.6%; Core Rises 0.4%

On the other hand, "(t)oday's report 'is the first piece of data that I've seen that would lead me to even consider a 50-basis-point move, but I think we would need to see several ugly price readings and a renewal of strong economic growth before a larger rate hike becomes a realistic option,' said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut."