May 30, 2023 — Hotter than Expected PCE Report


Following the recent report showing inflation is runningat a still robust 4.9 percent, the personal consumption expenditures price index (PCE) rose 0.4 percent for April, higher than the 0.3 percent expected. On a year-over-year basis, it is up 4.7 percent.  Including food and energy, the PCE is up 4.4 percent from a year ago, and higher than March’s 4.2 percent.

Looking at two key components, food prices are up 6.9 percent from a year ago, but energy is down 6.3 percent. The PCE gains are the highest seen since January. Some economists are now changing their outlook regarding the Fed’s policy meeting June 13-14. Expectations were for the Fed to keep rates flat, but now the strong inflation numbers may force yet another rate rise.

After the report’s release, the market says the chance of another quarter-point rate increase in June is 56 percent. The Fed will be watching the jobs report, out at the end of the week, and the CPI for May being released June 13, to dictate what action they should take on interest rates.