Fed's PCE Gauge Hits 3.8%, Three-Year High
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- PCE index rose 0.4% in April, marking the fifth consecutive large monthly increase, with the annual rate jumping to 3.8% from 3.5% — a three-year high.
- Core PCE (excluding food and energy) rose just 0.2% for the month, less than Wall Street expected, though its 12-month rate ticked up to 3.3%.
- The Federal Reserve's 2% inflation target remains far out of reach five years after the central bank launched its effort to return to pre-pandemic price levels, with stubborn inflation blocking rate cuts.
- Trump-era tariffs and a surge in gas prices tied to the Iran conflict are cited as drivers of renewed inflation, after the rate had slowed to 2.3% just one year ago.
- Gina Bolvin, president of Bolvin Wealth Management Group, said "hotter inflation limits the Fed's flexibility and pushes rate cuts further out" even as the economy continues to expand.
- Markets split on the report: the Dow Jones Industrial Average fell while the S&P 500 rose in Thursday trading, per the article.
Why it matters: Households and businesses face a stiffer cost-of-living squeeze, and the Fed's window for rate relief narrows: with headline PCE at 3.8% — nearly double the 2% target — and a fifth straight monthly increase, the central bank has little cover to ease borrowing costs on mortgages, credit, and business loans. A softer-than-expected core reading gave investors a partial offset, reflected in the divergent Dow and S&P 500 reactions.
