US inflation rises in line with expectations in March – PCE

The PCE price index, one of the Fed’s preferred inflation measures for its 2% target, increased 0.3% in March month on month, unchanged from the previous month and in line with expectations, with monthly inflation readings of 0.2% over time required to bring inflation back to target

Annualized PCE price index rose 2.7% in March after 2.5% increase in February and ticked above 2.6% consensus.

Moderate rise of US inflation in March is unlikely to change market expectations that the US central bank will hold off cutting interest rates until September. 

Concerns that inflation could exceed forecasts in March rose after the advance gross domestic product report for the first quarter showed price pressures heating up in 2024, driven by surging costs for services, especially transportation, financial services and insurance, offsetting the most of positive impact from a drop in the prices of goods. 

Fed policymakers meet next week and are widely expected to leave rates unchanged at 5.25%-5.50% range for the ninth consecutive month, after it pumped borrowing cost by 525 basis points during the cycle which started in March 2022.

Markets initially anticipated that the Fed would deliver its first rate cut in March, but the action was postponed first to June and then to September, due to disappointing labor and inflation data during past few months.