Key Fed inflation measure rose 2.8% in March from a year ago, more than expected

Inflation
showed
few
signs
of
letting
up
in
March,
with
a
key
barometer
the
Federal
Reserve
watches
closely
showing
that
price
pressures
remain
elevated.

The
personal
consumption
expenditures
price
index
excluding
food
and
energy
increased
2.8%
from
a
year
ago
in
March,
the
same
as
in
February,
the
Commerce
Department
reported
Friday.
That
was
above
the
2.7%
estimate
from
the
Dow
Jones
consensus.

Including
food
and
energy,
the
all-items
PCE
price
gauge
increased
2.7%,
compared
with
the
2.6%
estimate.

On
a
monthly
basis,
both
measures
increased
0.3%,
as
expected
and
equaling
the
increase
from
February.

Markets

showed
little
reaction
to
the
data,
with
Wall
Street
poised
to
open
higher.
Treasury
yields
fell,
with
the
benchmark
10-year
note
at
4.67%,
down
about
0.4
percentage
points
on
the
session.
Futures
traders
grew
slightly
more
optimistic
about
two
potential
rate
cuts
this
year,
raising
the
probability
to
44%,
according
to
the
CME
Group’s
FedWatch
gauge.

“Inflation
reports
released
this
morning
were
not
as
a
hot
as
feared,
but
investors
should
not
get
overly
anchored
to
the
idea
that
inflation
has
been
completely
cured
and
the
Fed
will
be
cutting
interest
rates
in
the
near-term,”
said
George
Mateyo,
chief
investment
officer
at
Key
Wealth. “The
prospects
of
rate
cuts
remain,
but
they
are
not
assured,
and
the
Fed
will
likely
need
weakness
in
the
labor
market
before
they
have
the
confidence
to
cut.”

Consumers
showed
that
they
are
still
spending
despite
the
elevated
price
levels.
Personal
spending
rose
0.8%
on
the
month,
a
touch
higher
even
than
the
0.7%
estimate
though
the
same
as
February.
Personal
income
increased
0.5%,
in
line
with
expectations
and
higher
than
the
0.3%
increase
the
previous
month.

The
personal
saving
rate
fell
to
3.2%,
down
0.4
percentage
points
from
February
and
2
full
percentage
points
from
a
year
ago
as
households
dipped
into
savings
to
keep
spending
afloat.

The
report
follows

bad
inflation
news
from
Thursday
and
likely
locks
the
Fed
into
holding
the
line
on
interest
rates
through
at
least
the
summer
unless
there
is
some
substantial
change
in
the
data.
The
Commerce
Department
reported
Thursday
that
PCE
in
the
first
quarter
accelerated
at
a
3.4%
annualized
rate
while
gross
domestic
product
increased
just
1.6%,
well
below
Wall
Street
expectations.

With
inflation
still
percolating
two
years
after
it
began
its
initial
ascent
to
the
highest
level
in
more
than
40
years,
central
bank
policymakers
are
watching
the
data
even
more
intently
as
they
contemplate
the
next
moves
for
monetary
policy.

The
Fed
targets
2%
inflation,
a
level
that
the
core
PCE
has
been
above
for
the
past
three
years.

The
Fed
watches
the
PCE
in
particular
because
it
adjusts
for
changes
in
consumer
behavior
and
places
less
weight
on
housing
costs
than
the
more
widely
circulated
consumer
price
index
from
the
Labor
Department.

While
they
watch
both
headline
and
core
measures,
Fed
officials
believe
the
index
excluding
food
and
energy
provides
a
better
look
at
longer-run
trends
as
those
two
categories
tend
to
be
more
volatile.

Services
prices
increased
0.4%
on
the
month
while
goods
were
up
0.1%,
reflecting
a
swing
in
consumer
prices
as
goods
inflation
dominated
since
the
early
days
of
the
Covid
pandemic.
Food
prices
showed
a
0.1%
decline
on
the
month
while
energy
rose
1.2%.

On
a
12-month
basis,
services
prices
are
up
4%
while
goods
have
barely
moved,
increasing
just
0.1%.
Food
is
up
1.5%
while
energy
has
gained
2.6%.