The Fed's latest measure of desired inflation showed that prices rose more than Wall Street expected in March.
The core personal consumption expenditures (PCE) index, which excludes food and energy costs, which is closely monitored by the Federal Reserve, rose 2.8% year over year in March, beating expectations of 2.7%. There was no change from the annual increase rate. During February.
Compared to the previous month, core PCE rose 0.3%, in line with Wall Street expectations.
Nationwide senior economist Ben Ayers said core PCE rose at an annualized rate of 4.4% through the first three months of the year, a “concerning” trend.
“High levels of inflation through March will negate any rate cuts in the first half of 2024,” Ayers said in a note Friday.
The observation comes as recent hot inflation reports have dampened investors' expectations for the Federal Reserve to cut interest rates this year. Fed Chairman Jerome Powell has consistently said the Fed will not cut interest rates until it has “greater confidence” that inflation is coming down.
Chairman Powell said on April 16, “Recent data clearly does not give us much confidence and instead indicates that it will likely take longer than expected to achieve that confidence.'' Stated.
Friday's March PCE data builds on the same quarter's data that surprised the market on Thursday. Data from the U.S. Bureau of Economic Analysis showed that “core” inflation rose 3.7% in the first quarter from a year earlier, beating expectations of 3.4% and well above the 2% rise in the previous quarter.
This surprised investors. U.S. Treasury yields hit their highest level since November 2023, stocks headed lower and investors lowered their expectations that the Federal Reserve would cut interest rates this year.
Friday's announcement provided some relief to investors. The announcement included a revision to January's inflation rate, showing that prices had risen more than originally thought in the first month of the year. Core PCE rose 2.9% in January, up from a previously reported 2.8%. This indicates that his higher-than-expected inflation rate in the first three months of the year was driven primarily by inflation levels in the first half of the quarter rather than in the second half.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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