Inflation unexpectedly rose to 3.2% for the year ending in February, the Bureau of Labor Statistics reported Tuesday in an update to the consumer price index, an unwelcome development that could delay the Federal Reserve‘s plans to cut interest rates in the coming months.

The rise in inflation is also bad news for President Joe Biden on the tail of his State of the Union address, in which he touted the decline in inflation over the past year.

The Fed has worked to drive down inflation for two years by hiking interest rates. The uptick in inflation reported Tuesday makes the timing of when the Fed will begin trimming rates in the coming months less certain.

On a month-to-month basis, inflation rose by 0.4%, which is in line with projections.

“Core inflation,” a measure that excludes the volatile categories of food and energy, fell a tenth of a percentage point to 3.8% for the year ending in February. On a monthly basis, core inflation rose 0.4% — the same as in January.

Overall, core inflation largely trended down over the past year, a sign the Fed’s tightening is working.

“In terms of Fed policy, officials want to see some more evidence of a sustained deceleration in prices towards target before they pivot to rate cuts,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “The latest data further reinforce the case for a patient and vigilant approach from Fed officials as they consider future policy decisions.”

Annual inflation peaked at about 9% in June 2022, and while it is much lower now than it was, it is still running higher than the Fed’s preferred 2% level.

Rising housing costs drove the uptick in inflation in February. Shelter costs rose 0.4% over the month and 5.7% on the year. Shelter and gasoline prices contributed over 60% of the monthly increase in overall inflation.

The energy index rose 2.3% over the month as all of its component indexes increased. That comes a month after energy prices had decreased. But despite February’s uptick, energy prices are still down nearly 2% from this time last year.

The food index was unchanged in February, as was the food at home index. The food away from home index rose slightly by 0.1% over the month.

Inflation has been blamed on factors on the supply and demand sides of the equation. Republicans generally blame inflation on the rash of stimulus spending amid the pandemic coupled with ultralow interest rates. Democrats often highlight supply-side problems and note that inflation has increased in most Western countries and not just the United States.

There has recently been a renewed sense of hope the Fed will be able to pull off a “soft landing,” a scenario in which inflation meaningfully falls back to a healthy level while the broader economy avoids a recession.

While the central bank’s monetary policy committee is predicting three rate cuts this year, some investors are betting officials will go even further, according to the CME Group’s FedWatch tool.

The odds of when the Fed is going to pivot toward cutting interest rates have changed considerably in just the past few months. Around the end of last year, many investors were expecting the first rate cut to come at the Fed’s March meeting, but now, it is looking more likely that the pivot will occur in June or July.

The markets are hoping for rate cuts because they tend to boost the stock market, which has remained strong the past year despite the higher interest rate environment. The S&P 500 has recently broken record all-time highs.

The labor market has given the Fed some wiggle room in its quest to fight inflation.

The economy beat expectations again in February and added 275,000 jobs, the Bureau of Labor Statistics reported last week — a sign the labor market is retaining momentum early in the year. The unemployment rate rose two-tenths of a percentage point to 3.9%. The unemployment rate remains low by historical standards.

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Biden used his recent State of the Union speech to tout the job growth, which has seen positive monthly gains for more than three years.

“I inherited an economy that was on the brink,” Biden told Congress. “Now, our economy is the envy of the world! Fifteen million new jobs in just three years — that’s a record! Unemployment at 50-year lows.”