April PCE data shows rising prices driven by energy and housing costs, raising concerns over slowing incomes and potential policy shifts
The first inflation report under new Federal Reserve chief Kevin Warsh shows that consumer prices accelerated sharply in April, reaching their highest level in nearly three years.
According to the Commerce Department, the personal consumption expenditures (PCE) price index the Federal Reserve’s preferred inflation gauge rose 3.8% year-over-year, up from 3.5% in March and the highest reading since May 2023. Core inflation, which excludes food and energy prices, increased 3.3%, broadly in line with forecasts but still signaling persistent price pressures.
The data highlights renewed inflationary momentum driven largely by higher energy costs, alongside increases in housing, utilities, recreation services, and food-related expenses. Economists note that the acceleration comes at a time when household income growth is slowing, raising concerns about declining purchasing power.
Real personal income growth lagged behind inflation at 2.5%, while the personal savings rate fell to 2.6%, suggesting that many households are increasingly relying on savings to maintain spending levels. Consumer spending rose modestly in nominal terms, but real (inflation-adjusted) gains were minimal.
The report presents an early challenge for Warsh, as markets reassess the likelihood of interest rate cuts this year amid persistent inflation and rising energy prices. Some analysts now see a growing possibility of rate hikes if inflation remains elevated.
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