U.S. Fed's closely watched inflation measure rises 2.3 pct in March
The PCE (Personal Consumption Expenditures) gauge takes into account how consumers change their behavior in light of higher prices, and is a broader measure of consumer behavior than the consumer price index (CPI).
The so-called core PCE price index, which strips out volatile food and energy prices, rose 2.6 percent in March from a year ago, slowing from a 3.0 percent increase in February. The latest data is still above the Fed's inflation target of 2 percent.
Despite signs of easing inflation, economists remain concerned about future inflation due to the Trump administration's expansive tariff policies.
In mid-April, Federal Reserve Chairman Jerome Powell warned that the administration's tariff hikes are likely to cause a short-term rise in inflation, while supply chain disruptions could lead to more persistent pressure.
"The level of the tariff increases announced so far is significantly larger than anticipated. The same is likely to be true of the economic effects, which will include higher inflation and slower growth," Powell told an event hosted by the Economic Club of Chicago.
The PCE data was released on the same day when the U.S. Bureau of Economic Analysis (BEA) reported that U.S. gross domestic product (GDP) shrank at an annual rate of 0.3 percent in the first quarter of this year.
The Kobeissi Letter, a financial publication, noted that multiple indicators are now showing a recession to the base case expectation in 2025.
"Markets fully price-in four 25-basis point interest rate cuts by the end of 2025. Markets think that the Fed will prioritize declining U.S. economic output over a potential rebound in inflation," the Kobeissi Letter said.
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