Americans got some welcome relief from rising inflation in April, data from the Bureau of Economic Analysis showed Friday.
The personal consumption expenditure price index climbed 0.3 percent in April, matching Wall Street’s forecasts and the previous month’s rate of inflation. Compared with a year ago, the index was up 2.7 percent, also matching expectations and the prior month’s increase.
The so-called core personal consumption expenditures price index, which excludes volatile food and energy prices, increased 0.2 percent from the prior month. That’s a decline from the 0.3 percent reported for March and the smallest increase this year.
Core PCE prices were up 2.8 percent over the past 12 months, unchanged from the prior month.
Analysts are increasingly drilling down into the numbers in hopes of finding some signs of progress on inflation. This month’s report, for example, shows some progress when looking at unrounded numbers. The unrounded month-to-month headline figure rose 2.566 percent, which is a decline from the prior month’s 0.3383 percent. The core index rose 0.2417 percent, decline from 0.33426 percent.
In a speech last week, Fed Governor Christopher Waller pointed out that there’s only so much solace provided by such tiny improvements that round to unchanged inflation.
“I look forward to the day when I don’t have to go out two or three decimal places in the monthly inflation data to find the good news,” Waller said.
The Federal Reserve uses the PCE index as the official metric for its two percent inflation target. Anonymized forecasts of Fed officials for overall PCE inflation and core inflation are released every other meeting of the Federal Open Market Committee in a report called the Summary of Economic Projections (SEP).
PCE-measured inflation moved above the Fed’s target in March of 2021, shortly after President Biden took office, and reached 7.1 percent year-over-year in June of 2022. It declined steadily from September 2022 through June of 2023 but progress since has largely stalled. Since last winter, inflation has been stuck in a range between 2.5 and three percent.
At the start of the year, the SEP suggested that Fed officials expected to cut interest rates three times this year and market prices indicated that the Fed was expected to cut five or six times. Stubborn inflation has forced the Fed to rethink rate cut plans, with officials saying that they will need several months of good inflation data before they are ready to cut. Markets now reflect expectations for just one or two cuts this year, with some analysts saying the Fed will not cut until next year.
Friday’s report did little to change these expectations. Reactions in bond and futures markets were muted and stocks were close to unchanged. The report may offer some comfort to Fed officials because it suggests that the surge in inflation seen at the start of the year has not worsened and inflation may be softening a bit at the margins.
