US inflation rises to 6.6%, PCE index shows, but prices may also be at their peak 2022-04-29 08:38:00

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Numbers: The Fed’s preferred measure of inflation rose 0.9% in March, but the increase stemmed in large part from the rising cost of gas and there were some signs that severe price pressures may be starting to ease.

Over the past 12 months, the PCPI rose 6.6% from 6.4% in Februarythe government said on Friday. This is the largest increase since 1981.

However, a narrower measure of inflation that strips out volatile food and energy costs, known as core personal consumption expenditures, rose just 0.3% in March for the second month in a row. It matched Wall Street expectations.

The increases in core inflation in February and March were the smallest consecutive readings since last summer.

Moreover, the core inflation rate fell last year to 5.2% from 5.3%, marking the first month-to-month decline in more than a year.

The Fed sees the PCE – the core rate in particular – as the most accurate measure of US inflation. It’s more comprehensive and taken into account when consumers substitute cheaper goods for more expensive ones – say ground beef for filet mignon or frozen spinach for fresh.

The Big Picture: The highest rate of inflation since the early 1980s has increased financial pressure on households and businesses. Even if the inflation rate slows down except for gas and food, it provides a small relief Americans who have to pay more to fill the tank and put dinner on the table.

The Fed is moving to raise interest rates quickly to try to cool inflation, but economists say it will take time.

Prices have skyrocketed due to the ongoing pandemic-related shortages of key supplies such as computer chips. The Fed’s easy money strategy and massive government spending also contributed to stimulus after the virus outbreak. Now all that stimulus is gone or gone away.

However, high inflation stimulates Workers to demand higher wages And companies to impose higher rates, which could make it difficult for the Federal Reserve to reverse.

I look ahead: “The bigger story from today’s data was further evidence that inflation is starting to subside,” said US economist Andrew Hunter of Capital Economics.

“This will not prevent the Fed from rising 50 basis points next week, but it supports our view that inflation will fall a little more quickly this year than Fed officials are now projecting,” he added.

market reaction: Dow Jones Industrial Average
DJIA,
-1.36%

and S&P 500
SPX,
-2.02%

It is scheduled to open lower on Friday trading.

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