The latest data from the US government shows that the country’s favored measure of inflation held steady in April. The personal consumption expenditures (PCE) price index remained at an annual rate of 2.7 percent, with monthly inflation increasing by 0.3 percent. This news is expected to prompt the Federal Reserve to maintain elevated interest rates throughout the summer as it aims to balance its monetary policy goals with the need to keep inflation in check.
The increase in inflation, particularly in the services sector, has complicated President Joe Biden’s efforts to reassure consumers about the state of the economy ahead of the upcoming election. Despite some moderation in core inflation, which excludes food and energy prices, the overall inflation rate remains at 2.8 percent annually.
According to New York Fed President John Williams, inflation is expected to moderate in the second half of the year. As a result, the likelihood of early rate cuts by the Federal Reserve has decreased. Futures traders are currently assigning a probability of just over 50 percent that the Fed will vote to cut interest rates by mid-September.
The data also revealed that personal income eased to 0.3 percent last month, down slightly from the previous month. Additionally, personal savings as a percentage of disposable income remained at 3.6 percent, consistent with the revised figure from the previous month.
