Key insights
- April's core PCE inflation met annual expectations at 3.3%, but decelerated slightly month-on-month to 0.2%. Headline PCE also met forecasts at 3.8% annually, easing to 0.4% monthly. Personal spending growth slowed to 0.5%. While inflation remains a concern, particularly with geopolitical tensions impacting energy prices, the data suggests a marginal cooling. This could provide the Fed some flexibility, but the market remains sensitive to any signs of persistent inflationary pressures that might necessitate further rate hikes.
Investing.com - A gauge of inflation closely watched by the Federal Reserve rose as expected in April on an annualized basis, and decelerated marginally month-on-month, as investors kept tabs on the impact of the Iran war on prices and interest rates.
The so-called "core" personal consumption expenditures price index, which strips out volatile items like food and fuel, came in at 3.3% in April, in line with expectations and above March’s reading of 3.2%.
Month-on-month, the reading stood at 0.2%, down from estimates that it would equal 0.3% in March.
Headline PCE was 3.8% year-on-year, also meeting forecasts and faster than 3.5% in the prior month, while the index eased month-on-month to 0.4% from 0.7%, slower than expectations.
Personal spending, meanwhile, decelerated to growth to 0.5% in April, versus 1.0% previously.
The Fed has been paying close attention to signs that inflation is heating up across the economy and spreading beyond a recent surge in gasoline prices brought on by the effective closure of the Strait of Hormuz due to the ongoing conflict between the U.S. and Iran.
Expectations have grown that the Fed, and other central banks around the world, may need to raise interest rates to corral inflationary pressures.
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