US inflation rises in line with expectations in April

In the 12 months through April, the PCE price index rose 2.7% after advancing 2.7% in March.

U.S. inflation tracked sideways in April, a worrying sign for the U.S. central bank that suggests the elevated pace of price increases could last longer than expected and casts doubt on how soon it will be able to cut interest rates.

The personal consumption expenditures (PCE) price index increased 0.3% last month, the Commerce Department's Bureau of Economic Analysis said on Friday, matching the unrevised gain in March.

In the 12 months through April, the PCE price index rose 2.7% after advancing 2.7% in March. Economists polled by Reuters had forecast it would climb 0.3% on the month and 2.7% on a year-on-year basis. The PCE price index is one of the inflation measures tracked by the U.S. central bank for its 2% target. Monthly inflation readings of 0.2% over time are needed to bring inflation back to target.

The Fed has kept its benchmark policy rate in the 5.25%-5.50% range for the past 10 months and was stung by three months of stronger-than-expected inflation and labor market readings from January to March after more encouraging readings in the fourth quarter of last year.

Earlier this month, however, readings for monthly April job gains and the consumer price index, another closely-watched inflation gauge, appeared to provide some relief for the Fed. U.S. job growth was at the lowest level in six months and the CPI increased less than expected.

The Fed has raised borrowing costs by 525 basis points since March 2022 in a bid to cool demand across the economy. Financial markets initially expected the first rate cut to come in March, which then got pushed back to June and now to September.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased by 0.2%, down from a 0.7% rise in March. Revised gross domestic product data released on Thursday showed consumer spending moderating to a 2.0% pace in the first quarter from the brisk 3.3% pace in the October-December period.