Fed gauge: Core inflation 3.3% YoY in April, matching expectations Alternatives: - "Core inflation 3.3% YoY in April — Fed's preferred measure meets forecasts" - "Fed's preferred inflation gauge at 3.3% YoY in April, as expected

• Core PCE prices rose 0.2% monthly (below 0.3% estimate) and 3.3% annually (matching forecast), with headline PCE at 3.8% year-over-year, the highest since May 2023
• GDP growth was revised down to 1.6% annualized in Q1 from initial 2% estimate due to lower consumer spending and investment
• Markets expect Fed to remain on hold until late 2026, with traders pricing a potential rate increase in early next year rather than cuts

Summary: Fed's Preferred Inflation Gauge Meets April Expectations

Key Inflation Metrics:

The Federal Reserve's preferred inflation measure, core PCE (Personal Consumption Expenditures), rose 3.3% year-over-year in April, matching economist expectations. Monthly core PCE increased 0.2%, slightly below the forecasted 0.3%. Headline PCE inflation reached 3.8% annually with a 0.4% monthly gain, both in line with projections. The headline rate marked the highest level since May 2023, while core inflation hit its peak since November 2023.

GDP and Economic Data:

First-quarter GDP growth was revised downward to 1.6% (annualized), below both the initial 2% estimate and consensus forecasts, due to reduced consumer spending and investment. Consumer spending increased 0.5% in April as expected, but personal income remained flat against a 0.4% forecast. The personal savings rate dropped to 2.6%, its lowest since June 2022.

Initial jobless claims totaled 215,000 for the week ending May 23, slightly above the 213,000 estimate. Durable goods orders surged 7.9%, exceeding the 3.5% forecast, though excluding transportation, orders rose just 1.1%.

Market Implications:

The softer monthly inflation readings may signal easing price pressures, though markets expect the Fed to remain on hold until late 2026. Traders are pricing in a potential rate increase in early next year rather than cuts. Fed Chair remarks suggest openness to rate reductions, though likely facing FOMC opposition. Geopolitical tensions (Iran war) and tariff impacts continue constraining Fed policy flexibility despite inflation moderating from recent peaks.