Inflation accelerated slightly in March as Americans continued to see pay increases and a steady pace of spending, according to data released by the Commerce Department on Friday.
The personal consumption expenditure (PCE) price index, the Federal Reserve’s preferred measure of inflation, rose 0.3% in March and has risen 2.7% over the past year. Monthly inflation was steady, as expected by economists, but annual inflation was 0.1 percentage point higher than experts had expected.
Inflation rose slightly in March as consumer spending rose for the second consecutive month by 0.8% (0.5% after adjusting for inflation). Inflation-adjusted disposable income also increased by 0.5% and 0.2% in March, respectively. Last month was the first month since December that Americans had more money to spend, due to inflation and taxes.
Following the March inflation report, the Fed is likely to be on track to keep its benchmark interest rate in the range of 5.25% to 5.5% at next week’s policy meeting.
Despite expecting a series of rate cuts at the end of 2023, Fed officials held off on a series of strong economic indicators heading into 2024. Job growth has exceeded expectations for the fourth consecutive month, and the unemployment rate remains below 4. The percentage is the highest since the late 1960s.
Inflation has also trended upward throughout the year, as measured by both the PCE price index and the Department of Labor’s more prominent Consumer Price Index (CPI).
Although the U.S. economy grew weaker than expected in the first quarter, inflation remains 0.7 percentage points above the annual target, making it unlikely that the Fed will cut interest rates.
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