April PCE Inflation Seen Rising to 3.9%, Highest Since May 2023, Pressuring Fed

The U.S. Personal Consumption Expenditures price index likely climbed 0.5% in April from the prior month, lifting the annual rate to 3.9%, according to FactSet forecasts. That would mark a third consecutive monthly gain and the highest reading since May 2023 for the Federal Reserve’s preferred inflation gauge. Energy costs, particularly gasoline, drove the headline increase, mirroring trends in recent CPI and PPI reports. Core PCE, which strips out food and energy, is projected to rise 0.3% monthly and 3.3% annually, slightly above March’s 3.2% pace. The stubborn inflation is expected to keep the Fed on hold at its June 16-17 meeting, maintaining the benchmark rate at 3.50%-3.75%. Fed Governor Christopher Waller recently cautioned that the June statement should signal a rate hike is as likely as a cut. Separately, economists warn that the trimmed mean PCE favored by Fed Chair Kevin Warsh may understate underlying price pressures.