Fed inflation gauge slows further in April, adding to ‘peak’ bets
Updated at 9:14 a.m. EST
The Federal Reserve’s preferred measure of U.S. inflation eased further from multi-decade highs last month, data showed on Friday, adding to investors’ hopes that consumer price pressures have peaked in the world’s largest economy.
April’s core PCE price index rose 4.9% from a year ago, down from the highest levels since 1983, and 0.3% on the month, reported the Bureau of Economic Analysis said a figure that was broadly in line with Wall Street forecasts and continues to show signs of easing consumer price pressures. The March increase estimate was confirmed at 0.3%.
The overall PCE index rose just 0.2% on the month and 6.3% on the year, down from the highest levels since 1980. Personal income grew at a faster rate 0.3% slower than expected, while personal spending rose 0.9%, the BEA noted, just ahead of Street’s consensus forecast of a 0.7% advance.
The Bureau of Labor Statistics said earlier this month that its headline consumer price index for the month of April rose 8.3% from a year ago, from 8.5% in March. – the fastest rate since December 1981. On a monthly basis, inflation rose 0.3%, the BLS said, compared with a 1.2% rise in March.
Scroll to continue
“Lower prices for used cars and clothes, and slower increases in a range of non-housing services – likely thanks to moderating wage growth in recent months – have eased pressure on the economy. inflation, at the margin,” said Ian Shepherdson of Pantheon Macroeconomics. “We expect further slowdown in the second half, but the pace of decline is highly dependent on the speed and extent of retail and wholesale margin compression, due to inventory rebuilding.”
Futures stocks on Wall Street extended their gains after the data was released, with futures tied to the Dow Jones Industrial Average showing a drop in the opening bell of 115 points and those tied to the S&P 500, in down 14.8% for the year, priced at 29 points up.
Yields on benchmark 10-year US Treasury bonds rose slightly, to 2.74%, while the US dollar index, which tracks the greenback against a basket of six global currencies, fell further to hit a one-month low at 101.77.
CME Group’s FedWatch tool shows a 97.6% chance of a 50bp rate hike in June, as well as a 93.3% chance of a follow-on 50bp move in July.
The Atlanta Federal Reserve’s GDPNow forecasting tool, a real-time benchmark, suggests U.S. economic growth is expanding at a 1.8% pace, while the Commerce Department’s second estimate of U.S. growth quarter showed a contraction of 1.5%, the first in two years.