The U.S. Consumer Price Index came in a little weaker than expected Tuesday, easing fears the U.S. Federal Reserve will move to hike interest rates.

BMO Nesbitt Burns says that U.S. consumer prices came in better than expected for March, with headline results rising 0.3% on a 3.8% jump in energy costs. Core CPI finally showed some moderation, inching up only 0.1%. The core component was held back by lower vehicle prices and managed to overcome a sharp rise in apparel prices that might be due to faulty Easter seasonal factors.

“It is much too early to declare victory on the stubborn core CPI inflation rate. However, this is precisely the time in past cycles when core inflation finally turned decisively lower. It should not be a surprise if it does so again,” says BMO Nesbitt.

RBC Financial Group economists says inflation fears remain subdued in the U.S. but with greater concerns pushing into 2003. “The cooling in the core CPI yearly rate to 2.4% lends support to our view that core price inflation will ease towards 2% over the next few quarters, giving the Fed time to wait until August before raising rates,” says CIBC World Markets.

BMO Nesbitt Burns agrees, noting, “Given the uncertainty that surrounds financial markets and still-benign inflation, the Federal Reserve will be in no hurry to begin raising rates.”