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3w ago

U.S. PCE Inflation Rises to 3.8% as Energy Shock Pushes Prices Higher

The April surge increases the likelihood that the Federal Reserve will keep rates steady or tighten policy if higher energy costs feed into broader inflation.

A shopping trolley is seen in a supermarket in Nice, France, August 18, 2022. REUTERS/Eric Gaillard/File Photo
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Shoppers check foods at a supermarket in Tokyo, Japan January 10, 2023. REUTERS/Issei Kato
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Overview

  • The Bureau of Economic Analysis reported that the Personal Consumption Expenditures index rose 3.8% year‑over‑year in April with a 0.4% monthly gain and core PCE at 3.3%.
  • Gasoline and other energy prices were the largest drivers, with pump prices jumping about 5.5% in April as disruptions tied to the Iran conflict tightened global oil flows.
  • Households showed strain as nominal consumer spending rose 0.5% while real spending grew just 0.1%, disposable personal income fell 0.1%, and the personal saving rate dropped to 2.6%.
  • Financial markets and many Fed officials shifted away from expecting near‑term rate cuts and now price the policy rate to remain around 3.50–3.75%, with some officials saying they would raise rates if inflation stays high.
  • The report raises the risk that energy costs could pass through into wages and other prices, which would keep inflation elevated and threaten consumer demand and growth if households exhaust savings; the Fed’s June meeting and coming CPI/PCE readings will be key signals.