Prices in the United States climbed faster than expected in March, and economists say the increase in housing costs is largely to blame.

The Consumer Price Index used to measure inflation indicated that prices rose 3.5% in the 12 months ended in March, the Bureau of Labor Statistics reported Wednesday. Between February and March, prices climbed 0.4%.

Shelter inflation, the CPI’s measure of changes in the price consumers pay for housing, climbed 5.7% since March 2023 and rose 0.5% between February and March.

The new data comes as the U.S. Federal Reserve seeks to reduce inflation to 2% — a goal that has been impeded by persistent housing cost growth. Until the Fed cuts its federal funds rate, mortgage prices are expected to stay high, affecting the housing market and beyond.

"The Federal Reserve is unlikely to interpret this as good news in its quest," said Christine Cooper, chief economist at CoStar. She added that the latest data is "a clear signal that we should all expect rates to remain higher for longer."

Recent data indicates that housing is among the reasons inflation isn't slowing. Not including food and energy, housing price growth “was the largest factor in the monthly increase in the index,” according to the Bureau of Labor Statistics. Rent prices and the calculated owner’s equivalent both increased on a month-over-month basis.

According to the New York Fed’s multivariate core trend indicator, what it calls its measure of inflation’s “persistence” that seeks to “identify where the persistence is coming from,” housing inflation is falling, but at a slower rate than other parts of the economy.

One reason housing could be such an outsized contributor: a lag in data.

Private sector measures of pricing, such as online listing services, show real-time pricing for housing units that are actively for sale. But the Bureau of Labor Statistics uses a different method, instead sampling housing units once every six months.

“Since rents don’t usually change frequently, comparing samples over six months allows the BLS to pick up more meaningful changes,” according to economists at the Brookings Institute. Rent prices are then imputed to measure the cost of shelter for homeowners.

That's why, despite apparent decreases in price growth across various price measures, housing inflation is still showing up in a big way in the public data.

“Housing is definitely contributing to the elevated rate of inflation we’re continuing to see,” Sarah House, a senior economist at Wells Fargo, told CoStar News. “You’re seeing prices normalize to what we had before COVID, but that’s still kind of a hefty contributor.”

Wells Fargo anticipates the rate of growth in housing prices will “normalize” to pre-pandemic levels by about 2025, but it might be a slow-moving process, she said.