New inflation reading reinforces Fed’s higher-for-longer stance
Jennifer Schonberger · Senior Reporter
Fri, Apr 26, 2024, 7:48 AM MST
Another hot inflation reading reinforces that any near-term interest rate cuts are less likely as the Federal Reserve shifts to a higher-for-longer stance.
The Fed’s preferred inflation measure — the “core” Personal Consumption Expenditures index that excludes volatile food and energy prices — clocked in at 2.8% year over year for the month of March. That was the same level as February but a tenth of a percent higher than expected.
SIX-MONTH ANNUALIZED INFLATION REMAINS ABOVE THE FED’S TARGET
Month over month, the measure of inflation rose 0.3%, which was in line with expectations. “Today’s data means that it will take a longer string of months of good inflation data before the Fed will be comfortable with cutting,” said Preston Caldwell, chief US economist at Morningstar.
Tilley underscored that inflation of 2.8% is still within the range of the central bank’s 2.6% forecast for the end of the year.
“Powell said plenty of times last year that you have to start cutting before you get to 2%,” said Tilley.
On a six-month annualized basis, core PCE inflation now stands at 3%, but the three-month measure has jumped up to 4.4%.
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“I think it’s getting a huge boost from that January [inflation] reading, which is really high and looks seasonal,” said Tilley. “But it is enough for the Fed to be a little bit worried that you have a reacceleration going on here.”
“This is far from ideal conditions” for the Fed, added Lindsey Piegza, Stifel Financial chief economist, on Yahoo Finance Live.
“This is going to complicate their outlook and possibly delay” any talk of near-term cuts, she said.
If inflation continues to surprise to the upside, Piegza predicts it will put a conversation about rate hikes “back on the table.”
Source: Yahoo Finance
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