The PCE inflation index in the United States showed a rebound in March, with inflation accelerating to 2.7% year-on-year, up from 2.5% in February. This was higher than analysts had expected, and core inflation, which excludes volatile food and energy prices, also remained stable at 0.3% on a quarterly basis and 2.8% on a trend basis. Despite this, household incomes saw stronger growth in March compared to February, increasing by 0.5%, while spending remained unchanged with a monthly increase of 0.8%.
The Federal Reserve aims to bring down the PCE inflation index to 2%, but this rebound in inflation has encouraged caution before any rate reductions. The Fed’s chair, Jerome Powell, has warned that it may take longer than expected to achieve sustainable inflation levels, and markets are now anticipating a rate cut in September or November instead of June as previously expected. With a lively job market and low unemployment rate, the Fed’s intentions will be closely watched during its upcoming meeting. Acting too late in reducing rates could have negative effects on the economy and employment, so the Fed is carefully considering its options.
