Fed’s Preferred Inflation Gauge Holds Steady in April

The Fed’s preferred inflation gauge rose as expected, with consumer prices rising 0.3%, according to the Bureau of Labor Statistics. This marks the third consecutive month of a 0.3% increase. Year-over-year, prices held at 2.7% for the second month in a row.

Key figures:

• Monthly PCE price increase: 0.3% in April (consistent with the previous three months)
• Year-over-year PCE inflation rate: 2.7% in April (unchanged from March)
• Core PCE price increase: 0.2% in April (down from 0.3% in March)
• Year-over-year core PCE inflation rate: 2.8% in April (consistent with the previous two months)
• Personal spending: up 0.2% in April (below the expected 0.3%)
• Personal income: up 0.3% in April (in line with expectations)

Core Inflation: Consumer prices, excluding energy and food, came in cooler than expected. The core PCE index saw a 0.2% rise in April, down from 0.3% in March and slightly below the 0.3% increase economists had forecasted. However, the year-over-year core inflation rate held steady at 2.8% for the third consecutive month, meeting expectations.

Good News: The steadiness of the PCE price index offers the Fed some reassurance that inflation is not accelerating uncontrollably. However, the slight dip in core inflation, alongside lower-than-expected personal spending, suggests that consumer demand might be softening, which could influence future monetary policy decisions.

What To Watch: The Fed will continue to monitor inflation trends closely as it evaluates its next steps in monetary policy. The balance between fostering economic growth and keeping inflation within target ranges remains delicate.