The latest reading of the Fed’s preferred inflation showed that prices rose more than Wall Street had expected in March.
The core personal consumption expenditures (PCE) index, which excludes food and energy costs and is closely watched by the Federal Reserve, rose 2.8% in March from a year earlier, beating estimates of 2.7% and remained unchanged from the annual increase in February.
Compared to the previous month, core PCE rose 0.3%, in line with Wall Street expectations.
Friday’s release also included a revision to inflation for January that showed prices rose more than initially thought in the first month of the year. Core PCE rose 2.9% in January, up from a previous report of 2.8%. On a monthly basis, prices increased by 0.5%, exceeding the previous figure of 0.4% per month.
The reading comes at a time when continued hot inflation reports have dampened investor expectations of interest rate cuts by the Federal Reserve this year. Fed Chairman Jerome Powell has repeatedly reiterated that the Fed will not cut interest rates until it has “greater confidence” in the decline in inflation.
“Recent data clearly has not given us greater confidence and rather suggests that it will likely take longer than expected to achieve that confidence,” Powell said on April 16.
Friday’s March PCE reading comes after a look at the quarterly metric surprised investors on Thursday. Data from the Bureau of Economic Analysis showed that “core inflation” rose 3.7% year-on-year in the first quarter, above estimates of 3.4% and well above the 2% rise in the previous quarter.
That scared investors. Treasury yields hit their highest level since November 2023, stocks fell and investors cut their bets that the Federal Reserve will cut interest rates at all this year.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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