U.S. inflation cooled in April, with the Federal Reserve’s preferred gauge—the personal consumption expenditures (PCE) price index—rising 2.1% year-over-year, according to Commerce Department data released Friday.
On a monthly basis, the PCE index increased 0.1%, aligning with economists’ expectations. The core PCE index, which strips out volatile food and energy prices and is closely monitored by the Fed, also rose 0.1% month-over-month and 2.5% annually, slightly below the forecasted 2.6%.
Consumer spending rose just 0.2% in April, a slowdown from the 0.7% gain recorded in March. Meanwhile, the personal savings rate jumped to 4.9%, marking its highest point in nearly a year. Personal income saw a notable increase of 0.8%, surpassing the expected 0.3% rise.
Food prices dipped 0.3% while energy costs ticked up 0.5%. Shelter costs, a consistent inflation driver, rose 0.4%.
Market reaction was muted following the report. Stock futures edged lower, and Treasury yields showed mixed movement.
While inflation is hovering near the Fed’s 2% target, the central bank has not indicated plans to adjust interest rates in the near term. President Donald Trump, however, has renewed calls for rate cuts, citing the decelerating inflation trend.
“Much bigger increases in core goods inflation probably loom as the costs of the new tariffs are eventually passed on,” wrote Oliver Allen, senior economist at Pantheon Macroeconomics. “Accordingly, we still think core PCE inflation will peak later this year between 3.0% and 3.5% if the current mix of tariffs remains in place.”
Earlier this month, Trump imposed a 10% tariff on all U.S. imports. Though a court ruling struck down the measure, an appeals court later issued a temporary stay. The White House has initiated a 90-day negotiation period with trading partners as part of its ongoing trade strategy.
Trump met with Federal Reserve Chair Jerome Powell on Thursday, though the Fed clarified that monetary policy was not discussed during the meeting.
According to CNBC, economists will continue watching incoming inflation data closely as global trade dynamics and domestic policy shifts shape the outlook for prices and interest rates through the rest of 2025.
