JUNE 2, 2025 – INFLATION DROPS TO 2.1 PERCENT
The personal consumption index, the Fed’s preferred inflation gauge, was up 0.1 percent in April, which makes the annual inflation rate at 2.2 percent. Core inflation was also up 0.1 percent, or 2.5 percent annualized. The inflation rate is near the Fed’s targeted 2 percent, but the tariffs put into place at the beginning of the month have yet to affect the data.
The US consumer seems to be jittery, as consumer spending for April slowed, showing a 0.2 percent increase, below the 0.7 percent recorded in March. The personal savings rate rose significantly in April to 4.9 percent from 0.6 percent in March, and is at its highest level in nearly a year.
Even though inflation has now fallen close to the Fed’s target, policy makers will not make any adjustments until the effects of the trade policies work their way through the system. Some economists are predicting PCE inflation will peak later this year in the 3 to 3.5 percent range.