Updated at 9:49 amEDT
The Federal Reserve's preferred measure of inflation declined modestly in April, suggesting some early progress in slowing consumer price pressures in the summer months.
The Bureau of Economic Analysis' PCE price index showed underlying prices held at 2.8% last month, matching Wall Street's forecast and readings over the past two months, all of which were the slowest since March 2021.
On a monthly basis, underlying pressures increased by 0.2%, a slightly slower pace compared to the 0.3% increase in March. The latest count also surpassed Wall Street's consensus estimate.
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Markets typically focus on the bureau's core PCE price index, which the Fed considers a more accurate representation of consumer price pressures as it combines changes in spending patterns.
Meanwhile, the general index remained at an annual rate of 2.7%, matching Wall Street's forecast. Prices rose 0.3% month-on-month, the BEA said, following a similar increase in March.
The BEA also noted that personal income in April rose 0.3%, down from the 0.5% pace in March, reflecting some weakness in the labor market. Spending slowed to a 0.2% increase compared to a 0.3% increase in March.
“The data didn't show much progress on inflation, but it also didn't show any retreat,” said Chris Larkin, managing director of trading and investing at Morgan Stanley's E*Trade.
“Based on the initial reaction of stock index futures, the market will mostly see this as a positive,” he added. “Investors will have to be patient, however: the Federal Reserve has suggested that it will take more than a month of favorable data to confirm that inflation is reliably falling again, so there is no reason yet to think that a “First rate cut will occur before September.”
stocks rise, bond yields and dollar ease after PCE
stocks rose steadily after the data was released, with the S&P 500 swinging toward an initial gain of 10 points, or 0.2%, and the Dow Jones Industrial Average posting an initial gain of 75 points.
Benchmark 10-year bond yields fell 6 basis points to 4.499% following the release, while 2-year bonds fell to 4.898%.
The US dollar index, which tracks the dollar's performance against a basket of six global currencies, was down 0.27% at 104.431.
Related: Bonds Are Inflation-Crazy.
Earlier this month, the Commerce Department's headline consumer price index for April was set at 3.4%, down from 3.5% the previous month.
So-called core inflation, which excludes volatile components such as food and energy, slowed to an annual rate of 3.6%, the lowest in more than two years.
More economic analysis:
- Bonds Are Inflation-Crazy
- Key bond market signal sounds inflation alarm
- Fed Rate Cuts Face Big Reset Amid Renewed Inflation Risks
He CME Group FedWatch The tool suggests the market does not expect any rate changes from the Federal Reserve when its two-day May policy meeting ends on June 12, and again when the central bank meets in July.
However, bets on the Federal Reserve starting to cut rates in September remain at around 48.8%, and markets are still debating the odds of any rate cut between now and the end of the year.
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