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Home » The Fed’s preferred inflation measure rose 0.2% in April

The Fed’s preferred inflation measure rose 0.2% in April

The Federal Reserve’s preferred inflation measure, the personal consumption expenditures (PCE) price index, rose 0.2% in April, according to data released by the Commerce Department on Friday. This marks the fourth consecutive month of increase in the PCE price index, signaling a gradual uptick in inflationary pressures.

The PCE price index is closely watched by the Federal Reserve as it provides a more comprehensive measure of inflation than the more commonly cited Consumer Price Index (CPI). The Fed targets a 2% annual inflation rate as part of its mandate to promote price stability and full employment.

The 0.2% increase in the PCE price index in April was driven by higher prices for goods and services, particularly in the energy and food sectors. Energy prices rose 2.2% in April, while food prices increased 0.6%. Core inflation, which excludes volatile food and energy prices, also rose 0.2% in April.

While the increase in the PCE price index is a positive sign for the economy, some analysts are concerned that rising inflation could erode consumers’ purchasing power and lead to higher interest rates. The Fed has indicated that it is willing to tolerate a temporary overshoot of its 2% inflation target, but will closely monitor inflation data and adjust its monetary policy as needed.

Overall, the gradual increase in the PCE price index suggests that inflationary pressures are starting to build in the economy. While this is a positive sign of a recovering economy, policymakers will need to carefully balance the need for price stability with the goal of fostering economic growth and full employment. Only time will tell how the Fed will respond to these inflationary pressures in the coming months.