The Fed’s preferred inflation measure rose 5.2% in March as workers’ payrolls fell further 2022-04-29 07:33:48

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Canned goods are displayed at the Safeway Store on April 11, 2022 in San Anselmo, California.

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It is a metric the Fed is focused on to gauge the rise in inflation in March, and is likely to bolster the central bank’s intention to raise interest rates by half a percentage in May.

The core PCE price index, which measures costs that consumers pay across a wide range of items and shows how behavior has changed in response to market dynamics, is up 5.2% from a year ago, According to the Bureau of Economic Analysis.

However, that was just below the 5.3% reading in February, which was the highest since April 1983.

The March number was less than the 5.3% Dow Jones estimate. On a monthly basis, core prices rose 0.3%, in line with estimates, providing some hope that inflation may be peaking.

Including volatile food and energy prices, the PCE index accelerated 6.6%, the fastest pace since January 1982. Headline inflation rose 0.9% from February, much faster than the previous 0.5% increase.

separate inflation gauge, Labor Cost Index, down 1.4% in the first quarter of the previous period, according to the Bureau of Labor Statistics. The Dow Jones estimate of this level was 1.1%.

The index, which measures the total compensation cost of nongovernmental workers, has risen 4.5% over the past year. Separating wages and salaries, the increase was 5%, the highest growth rate ever in a series of data going back to 2002 although slightly higher than the previous quarter’s 4.9% gain.

“The bigger story from today’s data was further evidence that inflation is starting to ease,” wrote Andrew Hunter, chief US economist at Capital Economics.

Together, the data points don’t do much to dispel the idea of ​​it Inflation is going much faster What the Fed wants. As a result, markets are widely expecting a 50 basis point increase during next week’s FOMC meeting, with additional increases in the aftermath.

However, Hunter said the inflation data settlement “supports our view that inflation will fall a little faster this year than Fed officials now expect.”

The Fed’s job became more complex after Thursday’s BEA release that showed gross domestic product, the broadest measure of US economic growth, Decreased by 1.4% year over year in the first quarter.

While the decline came mostly from falling inventories and a record US trade deficit and was not expected to be repeated in subsequent quarters, the data However, it raised some concerns The economy is at least cooling if it is not heading into a recession.

Higher interest rates should help dampen activity further as the Fed looks to fight inflation not seen since the early 1980s from stagflation of low growth and high prices.

However, increasing labor costs are not keeping pace with inflation.

Real personal disposable income, or the amount of income after taxes adjusted for inflation, fell 0.4% in March after rising 0.1% in February. Real spending rose 0.2% while core personal income accelerated 0.5%.

Faced with rising costs and falling incomes, Americans indulged in savings. The personal savings rate, or the amount saved as a percentage of after-tax income, fell to 6.2% from 6.8% in February.

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