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Inflation as measured by the Personal Consumption Expenditures index, the Federal Reserve’s preferred inflation gauge, rose at a year over year rate of 3.6% in April. Prices rose 0.6% in April from March, the Bureau of Economic Analysis announced this morning. The inflation rate was in line with projections from economists ahead of the data.

The Federal Reserve has been arguing that the inflation spike to well above the central bank’s 2% inflation target is only temporary, a result of the collapse of prices a year ago during the quick but deep pandemic recession and glitches in the supply chain as the economy regains speed.

For the day, at least, the financial markets agreed. The Standard & Poor’s 500 stock index gained 0.07% and the Dow Jones Industrial Average added 0.19%. The NASDAQ Composite close higher by 0.09%. But the small cap Russell 2000 eased 0.18%.

The yield on the 10-year Treasury dropped 1 basis point to 1.59%.

The CBOE S&P 500 Volatility Index was essentially unchanged at 16.71, up 0.12% for the day, as investors and traders saw little need to hedge against volatility even ahead of the three-day Memorial Day holiday.

There was one niggling worry in the data. After-tax income slide 15.1% in April from the recent record growth seen level in March. March income had climbed 22.7% from February as consumers received billion in stimulus checks from Washington.In March consumer spending showed a complete recovery from the pandemic.

But while consumer spending as a whole has reached its pre-pandemic level, spending on services still lags. Despite a 0.6% increase in consumer spending in April, spending on services remained 4.7% below pre-pandemic levels.