Washington, DC – As Federal Reserve officials prepare to address the latest data on inflation, it is becoming increasingly evident that progress in combating rising prices has hit a roadblock. This trend is likely to influence a shift in tone towards a prolonged period of higher interest rates than previously expected.
The Fed’s focus on the personal consumption expenditures price index, a key measure of inflation, is expected to reveal continued elevated levels in March. Economists predict a slight acceleration to 2.6% annually, driven in part by increasing energy costs. The core metric, which excludes energy and food prices, is anticipated to show a 0.3% rise from the previous month.
While the core PCE data may not be as robust as the consumer price index, which exceeded estimates and caused market turbulence earlier this month, Fed Chair Jerome Powell and other officials are signaling a cautious approach to lowering rates. They emphasize the need for more confidence in a sustained decline in inflation before considering rate cuts.
Amidst a blackout period for Fed officials leading up to their upcoming meeting, attention will shift to data releases, including personal spending and income figures for March. Despite strong job growth, economists project continued growth in household spending and income, indicating a healthy economy.
Looking ahead, policymakers will also assess the government’s initial estimate of first-quarter economic growth, likely showing a cooling from the previous period’s robust pace. Additionally, a composite gauge of activity in both manufacturing and services, as well as new-home sales data, will provide further insights into economic trends.
As global economic activity remains a focus, central banks in Canada, Japan, Turkey, and other countries are expected to make important decisions regarding interest rates and economic policies. These developments, combined with ongoing factors such as consumer sentiment and inflation expectations, will continue to shape the global economic landscape in the coming weeks.
