(Reuters) – U.S. inflation followed a sideways trend in April, a worrying sign for the U.S. central bank that suggests the high pace of price increases could last longer than expected and raises doubts about how quickly interest rates can rise be reduced.
The personal consumption expenditures (PCE) price index rose 0.3% last month, the Commerce Department said Friday, matching unchanged gains in March.
The PCE price index rose 2.7% year over year, after rising 2.7% in March. Economists polled by Reuters had forecast interest rates would rise 0.3% monthly and 2.7% annually.
The Core PCE, which excludes food and energy prices, rose 0.2% month on month, less than the forecast repeat of March’s 0.3% increase. In the 12 months to April, the core index rose 2.8%, the same as expected and as last month’s rise.
MARKET REACTION:
STOCKS: US stock futures edged 0.26% higher, pointing to a positive open on Wall Street
BONDS: 10-year U.S. Treasury yields fell to 4.506% and two-year yields fell to 4.908%
FOREX: The dollar index recorded a slight loss to -0.33%, while the euro gained 0.41%
COMMENTS:
CHRIS ZACCARELLI, CHIEF INVESTMENT OFFICER, INDEPENDENT ALLIANCE ADVISOR, CHARLOTTE, NORTH CAROLINA (email note)
“This week’s key economic data came and went without much deviation from expectations. The inflation data was the most expected and exactly in line with the consensus, but the expenditure figures were slightly less than expected.
“The market has been concerned about inflation this year and there was a sigh of relief this morning when it came in no higher than expected. inflation figures.
“We are in a moment where you have to be careful what you wish for, because if slowing consumer spending leads to lower inflation and that allows the Fed to slowly cut spending, then that will be good for the markets. – and the economy – slows down too quickly, then corporate profits and stock prices will fall much faster than the Fed will be able to cut rates, so we would be cautious at this point.”
MICHAEL LORIZIO, SENIOR FIXED TRADER, MANULIFE INVESTMENT MANAGEMENT, BOSTON
“This is one of those rare cases where all the modeling and predictions actually matched where the actual measured data ended up.”
“This is essentially exactly what the Fed has described. This is a favorable report showing that nuclear power is slowing down and maybe some of the seasonality that they established in the first quarter of the year is going away and now we’re resuming the slowdown that we saw in the second half of the year . last year.”
“All of this has shown continued progress towards what they have identified as their end-2024 expectations, with core PCE being somewhere between 2.6% and 2.7%. This month shows significant progress and a real change from the trend we had seen at the start of the year in that first quarter, which showed the seasonality that is often visible in the first quarter as well.”
JOSEPH TREVISANI, SENIOR ANALYST, FX STREET, NEW YORK, NEW YORK
“The longer market inflation stays around 3%, the harder it will be for the Fed to argue for a rate cut. There is certainly nothing in these numbers that encourages the idea of a Fed rate cut.”
“These numbers do not give any impression that the Fed is achieving its goals. The target is already stated, so the markets are willing to give it some time – three months, four months, five months – but I don’t think that time is unlimited. And if you get a few more months of stable inflation at 2.8%, 2.7% on the PCE and well above 3% on the CPI, the Fed’s case for a rate cut will completely fall apart and the markets will go stagger. to have to recognize that.”
ART HOGAN, PRINCIPAL MARKET STRATEGIST, B RILEY WEALTH, NEW YORK
“This is a positive market report. It appears that both the headline and key figures were largely in line with expectations. The good news is: it’s not worse. And that’s exactly what we need now with inflation data. ”
BRIAN JACOBSEN, CHIEF ECONOMIST, WEALTH MANAGEMENT ANNEX, MENOMONEE FALLS, WISCONSIN“Incomes and expenditures were both slightly weaker than expected. Inflation-adjusted disposable personal income has been flat since February. The Fed can no longer focus solely on inflation. Consumers pretty quickly went from spending money like there’s no tomorrow to pinching pennies.”
(Compiled by the Global Finance & Markets Breaking News team)
