The Federal Reserve’s preferred gauge showed inflation heated up in April, as the conflict in the Middle East pushed oil prices higher.
The report reinforces that the central bank will remain firmly on hold until there is evidence that inflation is receding
The Personal Consumption Expenditures Index rose 3.8% in April, in line with expectations and up from 3.5% in March. Excluding volatile food and energy prices on a so-called “core” basis, PCE was up 3.3%, also in line with expectations, and up a tenth from 3.2% in March. Still, that’s the highest level in two-and-a-half years.
The estimates are in line with Fed officials’ expectations, many of whom have said inflation is moving in the wrong direction and that the risks are shifting from a balance between inflation and deterioration in the job market to a greater concern about rising prices. Most Fed officials see holding interest rates steady for now, with a growing chorus not ruling out a rate hike if inflation becomes persistent. Federal Reserve Governor Lisa Cook is in that camp.