All items inflation as measured by the Consumer Price Index rose by just 0.1% in March, the Bureau of Labor Statistics reported today. That is a big drop from the 0.4% increase in February. The year-over-year all-items inflation rate fell to 5.0% in March from 6% in February.

Inflation is coming down and it’s coming down pretty fast, right?

Well, no.

The core inflation rate, which excludes energy and food prices on the theory that they are too volatile to count as “real” inflation, rose 0.4% in March after climbing 0.5% in February. The year-over-year core inflation rate rose slightly to 5.6%.

So inflation is proving to be very sticky. And that means the Federal Reserve, which watches the core rate and not the all-items rate, will almost certainly raise interest rates again by 25 basis points at its May 3 meeting. The odds of a 25 basis point increase at that meeting were 73.2% this morning, according to the CME FedWatch tool. That’s just a tick higher than yesterday’s 72.9% odds.

Why the big discrepancy in the all-items and core rates?

Timing on energy prices. The new all-items inflation rate rolled over in March so that current energy prices are now compared with March 2022 when energy prices spiked after Russia’s invasion of Ukraine.

As you can see from the fact that the CME FedWatch odds of a 25 basis point increase on May 3 didn’t move on the news, the financial markets have pretty much decided that a rate increase at that meeting is a done deal.

Which leaves investors trying to figure out the Fed’s moves after May 3.

The odds of another 25 basis point increase at the June 14 meeting ticked up into positive territory today with 6.9% odds of an increase then. That doesn’t seem like much but a week ago no one believe–that’s 0% odds–in another 25 basis point increase in June.

That slight move toward a June increase runs directly counter to bets in the bond market where traders continue to price in nearly a full 100 basis points of interest rate cuts from the Federal Reserve in 2023.

Can’t both be right, I’d say.