The latest data released by the US Commerce Department on Friday reveals a significant acceleration in the country's inflation, as measured by the personal consumption expenditures (PCE) index. This development marks a reversal from the recent slowdown and increases the likelihood of another interest rate hike in June, according to experts.
In April, the PCE index recorded a year-on-year increase of 4.4%, up from the previous month's 4.2%. The rise was primarily driven by substantial increases in prices for services, food, and goods. Furthermore, monthly inflation rates also demonstrated an acceleration, indicating a broad-based uptick in price levels.
When excluding the volatile food and energy components, inflation remained robust, reaching 4.7% in April. This highlights underlying price pressures across various sectors of the economy.
Federal Reserve Chair Jerome Powell has emphasized the central bank's data-dependent approach in determining its next policy actions. Powell and other members of the Federal Open Markets Committee (FOMC) have been closely monitoring economic indicators to assess the need for further rate adjustments. While some members believe that rates have already reached a level sufficient to address inflation concerns, others, including Dallas Fed President Lorie Logan, have expressed a preference for another rate hike at the upcoming June meeting.
Market expectations reflect the possibility of a rate increase on June 14, according to futures traders, as indicated by data from CME Group. The decision will depend on the Federal Reserve's assessment of the inflationary pressures and their alignment with the long-term target of two percent.
As the US economy continues to navigate through inflationary challenges, the Federal Reserve's upcoming policy decisions will be closely watched by market participants worldwide.
