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  • Writer's pictureRealFacts Editorial Team

PCE Price Index Prompts Upward Market Move


Upward trending graph

Early Friday the Fed’s key inflation rate, Personal Consumption Expenditures (PCE), was reported before the market opened. In April, the PCE price index rose by 0.3% which aligned with expectations. The annual headline inflation rate also matched analyst estimates and remained steady at 2.7%. The Federal Reserve typically prioritizes core inflation, which excludes the volatile categories of food and energy prices. In April, the core PCE price index increased by 0.2% which was consistent with forecasts and marked the smallest rise year to date.

 

On an unrounded basis, the core PCE price index increased by 0.249%. While this figure may seem slightly more concerning than the rounded 0.2% increase, the bigger picture appears more favorable. Over a 12 month span core inflation came in at 2.8% which was in line with analysts' estimates. However, thanks to downward revisions in first-quarter inflation data, the Fed's primary core inflation measure registered a 2.75% increase over the past year on an unrounded basis. This is the lowest level that core inflation has reached since March 2021.

 

This favorable data lifted investors' hopes for rate cuts. Jed Graham, Investors Business Daily author, reported, “After April's core PCE inflation data, market pricing showed 53% odds that the first Fed rate cut will come by the Sept. 18 policy meeting, up slightly from 49% ahead of the report. Markets now see 55% odds of no more than one quarter-point rate cut for the full year, down slightly from 60%. That includes a 15% chance that the Fed will leave rates steady.” This slight boost in investor sentiment pushed the major indexes into the green as the markets opened. However, the markets quickly pared those gains, retreating intraday. A late-day surge caused many major indexes to finish in the green, resulting in a positive end to the week on the last trading day of May.

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