Fed’s preferred inflation measure remains high
Source: www.tradingview.com
United States core PCE (which excludes food and energy) printed at 4.6% y/y and the previous number was revised higher to 4.7% y/y. The annual change has a lower peak (LP) followed by a lower trough (LT) and its rate of change (ROC) is on the deceleration side of zero (blue rectangle). This needs to maintain for the disinflation process to unfold towards the Fed's inflation target of 2%. However, the monthly core PCE came in at 0.3%, which is 3.66% annualised – still high and above target.
The current inflation rate is still too high, but the tightening of lending conditions due to banking stresses will likley be more significant on slowing the economy than the expected 25bps hike on Wednesday. The economy is slowing down with advance GDP missing the 2% forecast yesterday, printing at 1.1%. In a previous article we wrote that consumption, the biggest component of GDP, is looking fragile. Thus, although the possibility of further interest rate hikes is not ruled out, the necessity of implementing them is debatable.
The Bureau of Economic Analysis reported that the reduction in headline PCE in March from February was due to a decline of 0.4% in goods spending, partially offset by a 0.1% increase in services spending.
Russell Shor
Senior Market Strategist
Russell Shor is a Senior Market Strategist at FXCM, having been promoted to the role in 2025 in recognition of his depth of insight and consistent delivery of high-impact market analysis. He originally joined FXCM in October 2017 as a Senior Market Specialist.
Russell holds an Honours Degree in Economics from the University of South Africa, is a certified FMVA®, and a full member of the Society of Technical Analysts (UK). With over 20 years of experience in financial markets, his work is renowned for its clarity, precision, and strategic value across asset classes.
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.