US ‘core’ inflation slows to 0.2%,easing inflation woes

The Core Personal Consumption Expenditures Price Index for April rose 0.2% month, lower than the market’s expectation of 0.3%, triggering hope that the worst of the recent inflation rise may be behind. The broader PCE index rose 0.3%, in line with expectations.

The core PCE index strips out the impact of volatile energy and food prices, and is the Federal Reserve’s preferred gauge to track prices.

The Dow Jones rose 0.2% in opening trade following the release of the data, while the US dollar index fell 0.3%.

On a year-on-year basis, prices measured by the core PCE and PCE indices rose 2.8% and 2.7%, respectively.

Economists viewed the data positively, as core PCE prices came in at the lowest since December.

Still, it remains to be seen if the data allows the Fed to cut interest rates earlier than expected as the central bank is keen for prices to come down to its 2% target on a year-on-year basis.

Alongside, the Fed also released the personal income and spending data, which showed that consumer spending, which accounts for 70% of the US GDP, rose a modest 0.2%, the lowest in three months and less than economists’ expectations. However, consumer spending may have also been affected by the earlier Easter.

Incomes increased by 0.3%, slightly lower than the 0.5% in the previous month.