The Fed’s preferred inflation measure cools again in March
The Personal Consumption Expenditures (PCE) price index, which is the Federal Reserve’s preferred inflation measure, showed a decline in March for the second straight month. According to a Commerce Department report, the PCE index dropped 0.2%, slightly worse than the expected 0.1% decline. The index, which excludes food and energy, has been slowing down since peaking in February 2020 when it hit 1.8%, reaching a low of 1.4% in March this year.
The decrease in the PCE index is an indication that the Fed’s rate-hike campaign is taking hold. Fed officials have been trying to bring inflation back to a target of 2% for years but have failed to achieve it. The central bank has been implementing a series of rate hikes, but this has not been enough to push the inflation rate up. However, the recent decline in the PCE index shows that the Fed’s efforts may finally be paying off.
Commerce Department report shows American consumers feeling the chill
The Commerce Department report also revealed that consumer spending growth has slowed down considerably, with a 0.1% increase in March, the smallest gain in nearly a year. The report suggests that American consumers are feeling the chill of rising prices and are becoming more cautious with their spending. The slowdown in consumer spending is a concerning trend for the US economy, as consumer spending accounts for more than two-thirds of economic activity.
The decline in consumer spending growth is an indication that Americans are becoming more retrenching, which could hurt the economy’s growth prospects. The report suggests that the moderation in spending is mainly due to higher prices for goods and services such as gasoline, housing, and healthcare. As a result, consumers are cutting back on other areas such as dining out and clothing purchases.
Personal Consumption Expenditures index eases further, indicating Fed’s rate-hike campaign is taking hold
The PCE index’s decline in March indicates that the Fed’s rate-hike campaign is taking hold, with inflation showing signs of easing. The PCE index’s 1.4% year-on-year growth is well below the Fed’s target of 2%, indicating that the central bank’s efforts to push inflation up are paying off. The Fed has been implementing a series of rate hikes and asset purchases to stimulate the economy, but it has been unsuccessful in raising inflation to its desired level.
The PCE index’s decline is a positive sign for the Fed, which has been struggling to achieve its inflation goal. The index’s slowdown suggests that inflationary pressures are easing, which could allow the central bank to maintain its current monetary policy stance. However, the moderation in consumer spending growth could pose a problem for the economy’s growth prospects, indicating that the Fed may need to tread carefully in its rate-hike campaign.
