Core PCE inflation rose 3.3% annually in April, while headline inflation hit 3.8%, keeping pressure on the Federal Reserve.
Core inflation rose at a 3.3% annual rate in April, matching forecasts, as the Federal Reserve’s preferred price gauge showed underlying inflation still running well above the central bank’s target.
The Commerce Department reported Thursday that core personal consumption expenditures prices, which exclude food and energy, increased 0.2% for the month and 3.3% from a year earlier. Economists surveyed by Dow Jones had expected a 0.3% monthly gain and a 3.3% annual rate.
The broader PCE price index rose 0.4% in April and 3.8% from a year earlier, compared with expectations for a 0.5% monthly increase and a 3.8% annual rate. The 3.8% figure refers to all items, while the 3.3% rate refers to the core measure excluding food and energy.
The distinction matters because Fed officials follow the PCE index closely when assessing inflation, and generally treat the core reading as a clearer signal of longer-running price trends because it strips out volatile grocery and energy costs.
There was some relief in the monthly details: both headline and core price gains came in softer than expected. But inflation remained elevated on a yearly basis. The 12-month headline rate was the highest since May 2023, while the core annual rate was the highest since November 2023.
Price pressure was uneven across categories. Goods prices climbed 0.7% in April, with gasoline up 5.5%. Services prices rose 0.3%, including a 0.6% increase in housing and utilities and a 0.5% gain in food services and accommodations. Broader housing prices rose 0.5%, while services excluding food, energy and housing increased 0.2% for the month.
The inflation data landed alongside a weaker reading on economic growth. A revised Commerce Department estimate showed gross domestic product expanded at a 1.6% annualized rate in the first quarter, down from the initial 2% estimate. The department attributed the revision to lower estimates for consumer spending and investment.
Other economic data were mixed. Initial jobless claims for the week ended May 23 rose by 5,000 to a seasonally adjusted 215,000, slightly above the 213,000 forecast. Orders for durable goods jumped 7.9% in April, well above the 3.5% estimate, though orders excluding transportation rose a more modest 1.1%.
Consumer spending increased 0.5% in April, in line with expectations, while income was flat against a forecast for a 0.4% gain. The personal savings rate fell to 2.6%, its lowest level since June 2022.
The report is unlikely to settle the Fed’s policy debate. Softer monthly inflation readings may offer some evidence that the latest burst of price pressure is easing, but the annual rates remain high enough to keep attention on whether inflation is cooling sustainably. Market pricing cited in the source material indicated traders expected the Fed to remain on hold until at least late 2026, with the next move seen as potentially being a rate increase.
The next test for policymakers will be whether April’s milder monthly core reading continues, or whether elevated annual inflation keeps the Fed cautious for longer.
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