The PCE price gauge for all items, including food and energy, rose 2.7% versus the expected 2.6%.
On a monthly basis, both indicators increased by 0.3%, as expected, equaling the increase from February.
The market reacted little to the data, with Wall Street poised to open higher. U.S. Treasury yields fell, with the benchmark 10-year note at 4.67%, down about 0.4 percentage points during the session. Futures traders are becoming slightly more optimistic about the possibility of two rate cuts this year, with the probability rising to 44%, according to CME Group’s FedWatch index.
“While the inflation report released this morning did not garner as much attention as feared, investors believe inflation will fully recover and the Fed will continue to cut interest rates in the near term,” Chief of Staff George Mateyo said. We shouldn’t get too attached to that idea.” Head of investment at Key Wealth. “While the prospect of a rate cut remains, it is not guaranteed, and labor market weakness will be needed for the Fed to gain confidence to cut rates,” he said.
Consumers indicated they were still continuing to spend despite rising price levels. Personal consumption increased by 0.8% in the month, the same as in February but slightly higher than the expected 0.7%. Personal income rose 0.5%, in line with expectations and above the previous month’s 0.3% increase.
The personal savings rate fell to 3.2%, down 0.4 points from February and down 2 points year-on-year, as households tried to save to keep up with spending.
The report comes on the heels of Thursday’s bad inflation news, which will likely force the Fed to keep interest rates on hold at least through the summer unless there is a significant change in the data. The Commerce Department reported Thursday that PCE accelerated at an annualized rate of 3.4% in the first quarter, while gross domestic product rose just 1.6%, well below Wall Street expectations.
Two years after inflation first began rising to its highest level in more than 40 years, central bank policymakers are relying on data as they ponder the next move in monetary policy. is being watched more closely.
The Fed targets inflation at 2%, and core PCE has exceeded this level for the past three years.
The Fed is paying particular attention to the PCE because it adapts to changes in consumer behavior and weighs less housing costs than the more widely distributed Labor Department Consumer Price Index.
Fed officials are watching both headlines and core policy, but food and energy are two categories that tend to be more volatile, so they are more sensitive to long-term trends. I think it will look good.
Services prices rose 0.4% and goods prices rose 0.1% from the same month, reflecting a rebound in consumer prices from the prevailing goods inflation since the early days of the coronavirus pandemic. In fact, food prices fell by 0.1% compared to the same month, while energy prices rose by 1.2%.
On a 12-month basis, services prices are up 4%, while goods have moved little, rising just 0.1%. Groceries he increased by 1.5% and energy by 2.6%.
This is breaking news. Please check back here for the latest information.