Fed's favored inflation gauge remained elevated in March

• PCE index rose 0.7% monthly and 3.5% annually in March, both in line with LSEG economist forecasts
• Core PCE increased 0.3% monthly and 3.2% year-over-year, matching expectations and indicating stubborn underlying inflation
• Elevated inflation measures suggest continued price pressures facing consumers and potential implications for Federal Reserve monetary policy decisions

Summary: Fed's Preferred Inflation Gauge Remains Elevated in March

The Federal Reserve's preferred inflation metric showed persistent price pressures in March 2026, according to Commerce Department data released Thursday. The Personal Consumption Expenditures (PCE) index rose 0.7% month-over-month and increased 3.5% year-over-year, both meeting economist expectations from LSEG polling.

Key Data Points:

• Core PCE (excluding food and energy): +0.3% monthly, +3.2% annually
• Both headline and core figures aligned with analyst forecasts
• Inflation remains "stubbornly high" as consumers face elevated price growth

Market Implications:

The sustained inflation readings suggest the Federal Reserve may face continued challenges in bringing prices down to its target level. The elevated PCE data is particularly significant as it represents the Fed's preferred inflation measure for policy decisions, potentially influencing future interest rate deliberations.

The report featured commentary from RBC Chief Economist Frances Donald, who discussed her April 2026 GDP forecast, inflation risks, labor market health, and consumer spending patterns contributing to what she described as a "bifurcated economy."

Context:

This developing story underscores ongoing inflationary pressures in the U.S. economy despite previous monetary policy actions. The consistency between actual figures and economist expectations suggests markets may have already priced in these inflation levels, though the persistently high readings maintain pressure on both policymakers and consumers facing elevated costs.

The data will likely factor prominently in upcoming Federal Reserve policy discussions regarding the trajectory of interest rates and monetary policy stance.