U.S. inflation is finally about to get the pickup that the Federal Reserve has been waiting for. A closer look at the math shows why it’s still too soon to declare mission accomplished.

An unusual plunge in costs for mobile-phone services in March 2017 has weighed on the consumer-price index, excluding food and fuel.

That drag is now set to fade, dialing up the year-over-year comparisons: In the 12 months ended in March, the core CPI rose 2.1 percent after climbing 1.8 percent in February, according to the median estimate in a Bloomberg survey ahead of Labor Department figures due Wednesday. The 0.3 percentage-point acceleration from a month earlier would be the biggest since 2004.

While the Fed’s preferred gauge of inflation is a separate consumption-based figure that’s still shy of its 2 percent goal, the core CPI’s leap above that threshold is certain to grab attention — even though it’s mainly a reminder of the transitory weakness in wireless costs often cited by central bankers. Other reports suggest the economy, while expanding with rising prices, isn’t yet overheating.

Inflation “might come across as being stronger than it actually is, if someone was just focusing on the year-over-year number,” said Sarah House, an economist at Wells Fargo Securities in Charlotte, N.C. While “the momentum is building, it’s just a little bit exaggerated” by the wireless-costs comparison.

Inflation hawks and investors are on watch for incremental signs of price pressures that could trigger faster interest-rate hikes by the central bank, which raised borrowing costs in March.

Month-over-month data indicate some moderation in core CPI, and energy prices may also have been a drag on overall inflation in March, House said.

Nonetheless, a pickup in the annual core CPI gain will help vindicate Fed policymakers’ assertion that transient factors were restraining inflation last year. Mobile-phone service costs slumped a record 7 percent in March 2017 as carriers sweetened data packages, and this category, along with weaker prices for items such as cars and medical care, continued to be soft.

“The 2017 shortfall from our 2 percent goal appears to reflect, at least partly, some unusual price declines, such as for mobile-phone plans, that occurred nearly a year ago,” Fed Chairman Jerome Powell said in a recent speech. “The 12-month change should move up notably this spring as last spring’s soft readings drop out of the 12-month calculation.”


Chandra writes for Bloomberg.