In March, inflation in the preferred Fed gauge reached 2.7%

Inflation ticked up to 2.7% for the year ending in March, as measured by the personal consumption expenditures price index, which is the gauge favored by the Federal Reserve.

The rise in headline inflation reported Friday morning by the Bureau of Economic Analysis is bad news for the Fed, which is working to quash inflation by keeping interest rates elevated. The consensus among economists was that PCE inflation would punch in at 2.6%. The Fed’s target is 2% inflation in the PCE index.

From February to March, inflation rose 0.3%, about in line with forecast expectations.

Core PCE inflation, a measure of inflation that strips out volatile energy and food prices, rose to a 2.8% year-over-year rate.

The news comes a day after the gross domestic product report, which showed that economic expansion fell well short of expectations in the first quarter of the year. The economy expanded at a 1.6% seasonally adjusted annual rate in the first quarter, far short of the 2.5% that was expected.

Friday’s PCE index report follows two other inflation reports for March — the closely watched consumer price index and the producer price index, which measures the prices paid by producers.

The CPI clocked inflation as rising to 3.5% in March, more than expected, and the PPI rose 0.6 percentage points to 2.1%.

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The biggest question for many economists heading into 2024 was when the Fed will begin cutting rates, something that investors have been hoping will happen soon.

But the hotter-than-wanted inflation reports have pushed back the expected timing, raising the stakes for the election season. The Fed’s interest rate target is now at 5.25% to 5.50%, a level it has been at since July.