Inflation remains stable in April in the US: will it be enough for the Fed?

inflation in USA It remained stable in April, a relief for Americans after the rebound at the beginning of the year that instilled in the markets the fear that high interest rates will continue for longer.

The PCE index of inflationthe one preferred by the Federal Reserve (Fed, central bank), published on Friday, reported a price increase of 2.7% in 12 months and 0.3% compared to March.

The data is in line with what analysts expected.

The inflation core, a key measure for the economy that excludes the most volatile food and energy prices, also remained stable in the year-on-year measurement, at 2.8%, but in the month-to-month comparison it even had a minimal decrease, to 0.2%.

Donald Trump, who hopes to return to the White House, accuses the president Joe Biden of being responsible for persistent inflation.

Rising prices are a central issue for Americans. Inflation erodes purchasing power and is a priority issue in the electoral campaign.

The Federal Reserve decided to increase its reference rates to maximum levels in more than two decades, from 5.25-5.50%, in an attempt to contain inflation. High rates make credit more expensive and thus discourage consumption and investment, thus limiting pressures on prices.

It’s enough?

The data will not be enough to convince the Fed to lower its rates: “The inflationary context suggests that those in charge (of the central bank) will be patient”he commented Rubeela Farooqichief economist of High Frequency Economics.

According to Farooqicould “react if the labor market weakens more than expected, as this would have an impact on demand and the trajectory of GDP”.

The other main measure of inflation, the consumer price index or CPI, published in early April, fell to 3.4% annually in April compared to 3.5% in March.

weakened consumption

Meanwhile, American spending, the engine of the world’s largest economy, suffered sharply in April, with an increase of just 0.2% compared to March, the Department of Commerce announced. In March the increase was 0.7% over February.

Revenue growth also moderated, to 0.3% in April versus 0.5% in March.

“The first spending data points to a new moderation in consumption in the second quarter“, he highlighted Farooqi.

The US economy suffers the impact of expensive credit. In the first quarter of this year, GDP expanded just 1.3% in annual projection (the 12-month estimate of maintaining the conditions at the time of measurement), compared to 3.4% in the fourth quarter of 2023.

The Fed’s next policy meeting will take place on June 11-12 and the market expects rates to remain unchanged.

The rebound of the inflation registered at the beginning of the year delays the decision to cut rates.