HomeU.S.US EconomyKey inflation gauge for the Fed rose 0.3% in March as expected

Key inflation gauge for the Fed rose 0.3% in March as expected

Inflation rose again in March despite a year of interest rate hikes, according to economic data released on Friday and monitored by the Federal Reserve.

In accordance with the Dow Jones forecast, the personal consumption expenditures price index, excluding food and energy, rose 0.3% for the month. The so-called core PCE increased 4.6% on an annual basis, which was slightly higher than the expected 4.5% increase and down 0.1 percentage point from February.

Including the volatile food and energy components, the headline PCE rose just 0.1% for the month, equating to an annual increase of 4.2%, a significant decrease from February’s 5.1% increase. This indicator crested at approximately 7 percent in June 2022, the highest level since December 1981.

The headline figure was lower because energy prices fell 3.7% for the month and food prices fell 0.2%. While the price of goods decreased by 0.2%, the price of services increased by 0.2%.

The employment cost index increased by 1.2% in the first quarter, which was greater than the forecasted increase of 1%.

Inflationary pressures manifested themselves in consumers’ desire to continue spending. As anticipated, personal income rose 0.3% for the month, but consumer expenditure remained unchanged.

While the annual rates are below the summits reached in 2022, they are still well above the central bank’s 2% objective, providing additional evidence that price increases are proving to be more persistent than policymakers anticipated.

Since March 2022, the Federal Reserve has raised its benchmark interest rate a total of nine times, for a total of 4.75 percentage points. At its meeting next week, the Federal Open Market Committee, which sets interest rates, is widely expected to sanction another quarter-point hike before assessing the impact of the policy tightening on the $26.5 trillion U.S. economy.

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