The headline PCE measure, which includes volatile food and energy costs, showed a monthly increase of 0.3% and a 12-month rate of 2.5%, compared with expectations of 0.4% and 2.5%.
Stock and bond markets were both closed for the Good Friday holiday.
The Fed considers both measures when deciding policy, but believes the core is a better measure of long-term inflation pressures. The Fed targets annual inflation at 2%. Core PCE inflation has not fallen below that level in three years.
“There's nothing really surprising about it, obviously not the numbers the Fed wants, but this does catch people off guard as people go back to work on Monday,” said Victoria Green, chief investment officer at G Squared Private. I don't think it will happen,” he said. wealthy people told CNBC. “Everyone will quickly turn to Labor and say, if we see any weakness or cracks here, this bit of stickiness in inflation and PCE won't matter as much.”
Rising energy costs pushed the headline number up by 2.3%. The food index rose 0.1%. Inflationary pressures increased by 0.5% in goods compared to 0.3% in services. This bucked the trend over the past year, where services actually increased by his 3.8% while goods decreased by his 0.2%.
Other upward pressure came from international travel services, air transport, financial services and insurance. On the product side, the automotive and parts category made the largest contribution.
As inflation rose, consumer spending also rose 0.8% in the month, well above the 0.5% expected, potentially indicating further inflationary pressures. Personal income rose 0.3%, slightly slower than the expected 0.4% increase.
The announcement came a little more than a week after the central bank once again kept its benchmark short-term borrowing rate on hold, signaling that inflation was not yet sufficiently advanced to consider cutting rates. Members of the Federal Open Market Committee reiterated three quarterly percentage point cuts this year and in 2025 in their quarterly updated rate forecast.
Markets expect the Fed to continue lowering rates again when it announces its decision on May 1st, and then to begin lowering rates at its June 11-12 meeting. Market prices are consistent with the FOMC's outlook for three rate cuts, according to CME Group's FedWatch futures market trend indicator.