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Posted May 26, 2023 at 11:00 am
The Personal Consumption Expenditure (PCE) price index, the Federal Reserve’s preferred measure of inflation, rose 4.4% year over year in April 2023, up from the 4.2% surge in March and above the expected 4.3% rise, the U.S. Bureau of Economic Analysis reported Friday.
This data point suggests that inflation is showing symptoms of stickiness, boosting projections of further Fed increases and supporting the FOMC’s indications that borrowing rates will have to remain high for longer.
Simultaneously, the BEA reported that personal expenditures increased at a 0.8% monthly rate in April, up from a flat reading in March and well above the 0.3% predicted.
Personal income climbed by 0.4% month-on-month in April, matching the predicted 0.4% growth and accelerating from the 0.3% increase in March.
Traders raised their expectations for an interest rate hike in June, now assigning a 46% market-implied probability of a 25-basis-point rise, up from the 42% chance priced prior to the PCE print. A hike by the end of the July meeting is priced in at a nearly 70% probability.
The U.S. dollar index (DXY), moved up by 0.25%. The policy-sensitive two-year Treasury yield increased by 10 basis points from 4.5% to 4.6%.
Futures on the S&P 500 index, erased session gains and traded flat for the day.
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Originally Posted May 26, 2023 – Fed’s Favorite Inflation Gauge Rises More Than Expected In April: Market Expectations Increase For June Interest Rate Hike
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