US prices cooled in April, according to major inflation gauges

A price gauge closely monitored by the Federal Reserve cooled slightly last month, a sign that inflation may be easing after running high in the first three months of this year.

Friday report from the Commerce Department showed that an index that excludes volatile food and energy costs rose 0.2% from March to April, compared with 0.3% in the previous month. It was the mildest increase so far this year.

The main PCE inflation gauge cooled in April, a welcome result after a warm-up in the first quarter,” said Kathy Bostjanic, national chief economist. “That said, Fed officials will need more than a month of better inflation data to sustain inflation enough to start cutting rates later this year,” she said.

Measured compared to twelve months earlier, these so-called 'core prices' rose by 2.8% in April, the same as in March. Headline inflation rose by 0.3% from March to April, the same as in the previous month, and by 2.7% from a year earlier, also unchanged from the March figure.

The Fed tends to favor the inflation gauge the government released Friday — the personal consumption expenditures price index — over the better-known consumer price index. The PCE index attempts to account for changes in the way people shop when inflation rises. For example, it can identify when consumers switch from more expensive national brands to cheaper store brands.

Friday's report also showed that income growth slowed in April and spending cooled sharply, a trend that could help moderate economic growth and inflation in coming months and possibly appease the Fed. Policymakers have said they need to see at least some dovish inflation reports before they feel comfortable cutting rates.


Food prices are still rising, but not as much as last year

01:57

Fed Chairman Jerome Powell has said he expects inflation to continue to decline this year but should gain “more confidence” in that forecast based on upcoming inflation reports.

According to Friday's report, grocery prices fell last month, although they are still significantly higher than before the pandemic. So the prices of durable goods, led by cheaper new and used cars, furniture and appliances. The cost of used cars has fallen by almost 5% in the past year.

However, gas prices rose 2.7% from March to April alone. Likewise, the costs of many services were rising faster than the Fed would like. Restaurant meals, for example, rose 0.3% from March to April and are 4% higher than a year earlier. Entertainment prices, including films and concerts, rose 7.4% compared to twelve months earlier.

Inflation fell sharply in the second half of last year, but then leveled off above the Fed's 2% target in the first few months of 2024. Now polls show higher rents, groceries and gasoline are angering voters as the presidential campaign intensifies, Donald Trump and his Republican allies have tried to shift the blame to President Joe Biden.

'An important question for the Fed that has been raised within the Fed [Federal Open Market Committee] and there are also questions among former Fed officials about whether the focus on achieving 2% is appropriate and whether 2.5-3% is a more realistic goal,” Quincy Krosby, Chief Global Strategist for LPL Financial, said in a note.

“Still, the market sees one more rate cut later this year and given the Fed's latest commentary, the majority of Fed speakers agree. The broader demand is now 2% sacred,” she said.

“The biggest concern is whether current policies punish those who can least afford higher interest rates, coupled with even higher prices.”

In recent weeks, a flurry of comments from Fed officials have underscored their intention to keep borrowing costs high for as long as necessary to completely beat inflation. As recently as March, Fed policymakers had collectively predicted three rate cuts this year, starting as early as June. Still, Wall Street traders now expect just one rate cut this year, in November.

An influential Fed official, John Williams, president of the Federal Reserve Bank of New York, said Thursday he expects inflation to cool again in the second half of the year. Until then, however, Fed Chairman Jerome Powell has made it clear that the central bank is willing to keep its key interest rate at 5.3%, the highest level in 23 years.

The central bank raised its benchmark interest rate from near zero to its current 15-month peak, the fastest rise in four decades, to try to curb inflation. The result is significantly higher interest rates for mortgages, car loans and other forms of consumer and business loans.

Related Posts

  • Politics
  • June 15, 2024
  • 2 views
  • 4 minutes Read
Biden campaign says it raised more than $28 million ahead of Hollywood fundraiser with Obama and dozens of celebrity supporters

Within 24 hours, President Joe Biden will have gone from the G7 summit to George Clooney. Mr Biden left Italy late on Friday evening after meeting with world leaders and…

  • Politics
  • June 15, 2024
  • 4 views
  • 6 minutes Read
The US supports 'a just and lasting peace' for Ukraine, Harris tells Zelenskyy at Swiss summit

Vice President Kamala Harris on Saturday pledged America's full support in supporting Ukraine and global efforts to achieve “a just and lasting peace” in light of the The Russian Invasion…

Leave a Reply

Your email address will not be published. Required fields are marked *

You Missed

Apple is joining the race to find an AI icon that makes sense

  • June 15, 2024
Apple is joining the race to find an AI icon that makes sense

Hidden costs of homeownership average $18,000 per year

  • June 15, 2024
Hidden costs of homeownership average $18,000 per year

I canceled a group trip. Do I still have to pay for the hotel?

  • June 15, 2024
I canceled a group trip.  Do I still have to pay for the hotel?

Gene could provide large wheat yields for a growing population

  • June 15, 2024
Gene could provide large wheat yields for a growing population

Former SpaceX employees are suing after they were fired after complaining of sexual harassment

  • June 15, 2024
Former SpaceX employees are suing after they were fired after complaining of sexual harassment

Biden campaign says it raised more than $28 million ahead of Hollywood fundraiser with Obama and dozens of celebrity supporters

  • June 15, 2024
Biden campaign says it raised more than $28 million ahead of Hollywood fundraiser with Obama and dozens of celebrity supporters

Honey bees can detect lung cancer, researchers say

  • June 15, 2024
Honey bees can detect lung cancer, researchers say

Financial fraud targets older adults. How to recognize it

  • June 15, 2024
Financial fraud targets older adults.  How to recognize it

Ten-year Treasury yields are falling as traders digest the drop in wholesale prices

  • June 15, 2024
Ten-year Treasury yields are falling as traders digest the drop in wholesale prices

According to research, eating more ultra-processed foods is linked to cognitive decline and stroke

  • June 15, 2024
According to research, eating more ultra-processed foods is linked to cognitive decline and stroke

New approach for identifying altermagnetic materials

  • June 15, 2024
New approach for identifying altermagnetic materials