The Personal Consumption Expenditures Price Index, the inflation measure favored by the Federal Reserve, posted a lower-than-expected increase in April, rising 2.1% from year-ago levels. Economists had forecast that the PCE index would rise 2.2%.
The core PCE, the version that subtracts volatile food and energy costs and that is the number really watched by the Fed, increased 2.5% from one year ago, in line with expectations.
The PCE Price Index increased 0.1% from month-ago levels. The core PCE Price Index also increased 0.1% month over month.
Both figures showed continued progress in reaching the Fed’s 2% inflation target.
And in an alternative universe, they would have fueled a solid rally in stocks on expectations that the report moved up the date when the Federal reserve would next cut interest rates.
In our universe, however, on Friday the Standard & Poor’s 500 edged 0.01% lower and the Nasdaq composite retreated 0.32%.
Investors and traders are taking seriously comments from Fed officials that they’re waiting for an end to tariff rate chaos and solid data on the effects of higher tariffs–and tariff policy whiplash–before making a decision to cut rates.
That stance seems understandable. For example, on Friday President Donald Trump announced plans to double tariffs on steel imported into the United States to 50% from 25%.
