The headline, all-items Personal Consumption Expenditures price index, the Federal Reserve’s preferred inflation measure, climbed at a 2.4% year over year rate in January. That was in line with what economists had forecast and down from the 2.6% annual rate in December.

The core PCE, that is after stripping out more volatile food and fuel prices, climbed at a 2.8% year over year rate. In December the annual rate of core inflation had been 2.9%.

But that was the end of the good news in today’s PCE inflation report. The core PCE climbed more quickly in January on a monthly basis than in December. Month to month the core inflation rate jumped by 0.4%. That was faster than the 0.1% month to month increase in December. And it was the fastest month to month rate of increase since January 2023.

The month to month increase was driven by prices in the service sector. The so-called “super core” inflation rate for services, which excludes housing prices, increased by 0.6% month over month. That’s the biggest month to month increase since March 2022.

The data put the final nail in the coffin for any interest rate cut at the Fed’s March 20 meeting. The CME FedWatch Tool today put the odds of no cuts at the March meeting at 97.5%, a tad higher than the 96% odds yesterday. The odds of no cut at the May 1 meeting are at 80.7% today, up from 73.8% a week ago.

Prices in the FedFunds figures market, the source of the CME odds, show a 63.5% chance of one or more cuts at the June 12 meeting and odds of 84% for one or more more cut by the July 31 meeting.

As of noon today, February 29, the yield on the 10-year Treasury was 4.23%, down 3 basis points on the day.