April's US inflation meets predictions: Commerce Department's Bureau of Economic Analysis

In April, U.S. inflation remained steady, aligning with market expectations, according to the Commerce Department's Bureau of Economic Analysis. The Personal Consumption Expenditures (PCE) price index, a key metric monitored by the Federal Reserve, rose by 0.3%, mirroring the previous month's gain. Over the twelve months leading up to April, the PCE price index increased by 2.7%, consistent with March's rise.

This stability in inflation raises concerns for the Federal Reserve, suggesting that the heightened rate of price increases may persist longer than anticipated. Consequently, there are doubts about the timing of potential interest rate cuts.

Economists, in line with Reuters' poll, had projected a 0.3% increase in the PCE price index for April and a year-on-year rise of 2.7%. The Federal Reserve aims for a 2% inflation target and typically looks for sustained monthly inflation readings of 0.2% to achieve this target.

Despite expectations for a rate cut earlier this year, the Federal Reserve has maintained its benchmark policy rate within the 5.25%-5.50% range for the past ten months. Stronger-than-expected inflation and labor market indicators from January to March tempered hopes for rate cuts after a more positive end to 2023.

However, recent data on April job growth and the Consumer Price Index (CPI) offered some reassurance for the Fed. April's job growth was the lowest in six months, and the CPI rose less than anticipated.

Since March 2022, the Fed has increased borrowing costs by 525 basis points to temper demand in the economy. Initially expected in March, the first rate cut has been postponed to June and now to September, according to financial market expectations.

Consumer spending, a significant driver of U.S. economic activity, rose by 0.2% in April, down from a 0.7% increase in March. Revised Gross Domestic Product (GDP) data revealed a moderation in consumer spending to a 2.0% pace in the first quarter, compared to the brisk 3.3% pace seen in the preceding October-December period.