Progress on inflation is moving in the wrong direction.

The latest Consumer Price Index, released Wednesday, showed that annual inflation ticked up to 3.5% in March from 3.2% in February. That marked the largest annual gain in half a year.

Even though the current inflation rate is better than last March’s 4.9% rate, it signifies the highly anticipated rate cuts investors were banking on may not come this year. Now, instead, they may need to brace for another rate hike as interest rates stand at a 23-year high.

This could mean that the many influential leaders and economists who long predicted storm clouds and a hurricane hitting the US economy may finally be right.

Chief among them is JPMorgan Chase CEO Jamie Dimon, whose annual shareholder letter this week highlighted “persistent inflationary pressures.” He also expressed skepticism regarding whether the economy will achieve a soft landing, where inflation continues to cool without causing an unemployment spike.

Federal Reserve officials share Dimon’s concerns, leading some to question whether any rate cuts should happen this year, starkly contrasting the median forecast of three cuts they made at last month’s meeting and first signaled back in December. But potentially persistent inflation isn’t the only red flag in the economy right now.

Leaving the door open for rate hikes

Fed Gov. Michelle Bowman said last week she’s even willing to consider raising rates “should progress on inflation stall or even reverse.” For now, she doesn’t think there’s a high likelihood that hikes will be merited.

Inflation measured by the Fed’s preferred gauge, the Personal Consumption Expenditures price index, is a percentage point lower than CPI. But it too accelerated in the latest report.

The significant progress in bringing inflation down from 2022’s multi-decade high last year came from supply chain improvements, a higher supply of workers due in part to immigration, and lower energy prices, Bowman said in a speech last week.

“It is unclear whether further supply-side improvements will continue to lower inflation,” Bowman added. At the same time, like Dimon, she’s worried geopolitical conflicts and fiscal spending could put more pressure on prices.

“In one word, the report was discouraging for the Fed and the prospects of a June cut,” Bank of America economists said in a note published after Wednesday’s CPI report. “Inflation is proving sticky.”

They still feel a June cut will happen but have “low confidence.” Investors, on the other hand, were much more convinced that won’t happen given the March CPI report.

Small-business owners haven’t felt this bad about the economy in over a decade

Although the economy is booming by many measures, including last month’s blowout jobs report, small business owners aren’t feeling gung-ho about it.

An index produced by the National Federation of Independent Business gauging how small-business owners expect to fare in the future dropped to its lowest level since 2012 last month.

The main contributor to the decline was a significant fall in the share of business owners who expect their inflation-adjusted sales to be higher during the next three months compared to current levels.

“The small business sector is showing signs of a potential slowdown,” NFIB head Holly Wade and the trade organization’s chief economist Bill Dunkelberg said in a report published Tuesday. “Continued stress in navigating inflation pressures leads as the top business problem,” they added.

Consumers aren’t confident in their ability to make on-time debt payments

Higher inflation is also weighing on consumers who are shouldering a record level of credit card debt.

And the highest share of consumers since the onset of the pandemic said they’re unsure if they’ll make a minimum debt payment on time, according to the New York Fed’s monthly Survey of Consumer Expectations that was released on Monday.

Across all age groups, the uptick was most profound among 40- to 60-year-olds. That’s significant because that cohort is experiencing an even lower unemployment rate than the nation overall.