In April, there were signs of a slowdown in inflation according to the Personal Consumption Expenditures Index (PCE), the Federal Reserve’s preferred indicator. Although prices remained high, the PCE, excluding food and energy costs, only rose by 0.2% compared to the 0.3% growth in March.
Looking at the year-to-date figures, the core PCE increased by 2.8%, in line with previous projections and maintaining the same growth rate as the past two months. This April reading represents the lowest monthly growth rate for the index in 2024, indicating a trend of moderation in prices.
The Federal Reserve has been closely monitoring these indicators as they directly impact monetary policy decisions. As a result, the market is adjusting to the possibility of higher interest rates lasting longer than initially anticipated. On Friday morning, the expectations of a rate cut by the Fed in September were around 50%, according to the CME FedWatch tool.
Fed officials have emphasized the need for more evidence of sustainable inflation reduction before considering any adjustments to interest rates. John Williams, president of the New York Fed, echoed this sentiment by stating that he expects a further decline in inflation in the second half of 2024. Williams believes that recent inflation readings are primarily a reversal of abnormally low readings from the second half of last year, rather than a break in the general downward trend of inflation.
The current scenario is leading to caution on the part of the Fed, reflecting the complexity of the economic environment in which policies are formulated. This phase of observation and calculated reactions from the US central bank will be crucial in determining the next steps in combating persistent inflation.
At the time of publication, the price of Bitcoin was quoted at $68,651.81, with a 1% increase in the last 24 hours.
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