In spite of unexpected inflation upticks in the first two months of the year, Federal Reserve Chairman Jerome Powell said the “story hasn’t changed” and signaled that interest rate cuts are still in play this year as the monetary body concluded its March meeting on Wednesday.

Major U.S. stock indexes shot up with the news as sticky inflationary pressure, recently driven mostly by the rising costs of shelter and energy, caused worry that the Fed may rethink its earlier position on coming rate decreases.

The Fed’s benchmark interest rate remains in the 5.25% to 5.5% range, the highest in decades. While the Fed has indicated a series of reductions will happen this year and likely to come in .25% increments, Powell has been steadfast in noting that officials want to see more evidence that inflation is under control and ticking toward the body’s goal of a 2% annual rate.

On Wednesday, Powell said it wasn’t clear if the surprise inflation increases in the first two months of the year are a “bump on the road or something else” but otherwise sounded optimistic about where the economy is headed.

“In the meantime, the economy is strong, the labor market is strong, inflation has come way down and that gives us the ability to approach this question carefully,” Powell said at a press conference Wednesday afternoon.

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Inflation shows surprise spike with housing, energy costs mostly to blame

The latest federal data shows prices on consumer goods and services inched up .4% in February from the previous month and 3.2% from the same time last year.

The main culprits behind the uptick, according to the Labor Department’s Consumer Price Index Summary for February, are energy prices and the cost of shelter. Energy costs rose 2.3% over January but were still down 1.9% over the past 12 months. The cost of housing, which includes a metric that estimates how much rent an owner would earn from their home, bumped up .4% month over month in January and is up 5.7% from this time a year ago.

Changes in the cost of shelter have an outsize impact on the consumer price index as the metric accounts for about one-third of the overall rate.

Core inflation, a measure that strips out volatile food and energy prices, continues to track higher than headline inflation and came in at a 3.8% annual rate in February but was down a tenth of a percent from January.

Interest rate adjustments are the Fed’s primary weapon in an ongoing battle against the elevated prices of consumer goods and services. While the monetary body has paused making any rate adjustments since its July 2023 meeting, it had assessed 11 increases going back to March 2022, the most aggressive series of rate hikes in decades.

The rate increases raise the cost of debt for businesses and consumers, a move that aims to reduce the amount of spending and overall economic activity. That shift in dynamics typically leads to lower inflation rates.