The Federal Reserve’s key inflation gauge was slightly higher than expected in April. The Personal Consumption Expenditures (PCE) index was up 3.6% year-over-year in April, versus up 2.4% year-over-year in March. Core PCE was up 3.1% year-over-year in April versus the consensus estimate of 2.9%, up from 1.9% year-over-year in March. Nevertheless, we believe the Fed is looking through the near-term inflation data. The Fed expects “base effects” (i.e., comparing current prices to prices at the early stage of the pandemic when prices were under pressure), bottlenecks, and ongoing supply chain disruptions to cause near-term pricing pressures, but the Fed still believes these factors will largely be temporary.
Rates Steady, Inflation Signals Persist
May 1, 2026
The Federal Open Market Committee (FOMC) held the federal funds rate at 3.50% to 3.75% on April 29, an outcome