April PCE inflation climbs to three-year high, core up 0.2%

The Federal Reserve’s preferred inflation gauge climbed to its highest level in nearly three years in April, reinforcing the central bank’s challenge in returning price growth to its target. The Personal Consumption Expenditures (PCE) price index rose 0.4% for the month and 3.8% from a year ago, according to a Commerce Department report released Thursday.

The core PCE index, which excludes volatile food and energy prices, increased 0.2% monthly and 3.3% annually. Both the monthly readings came in slightly below economists’ forecasts, while the annual figures matched expectations. The data indicates inflation remains well above the Fed’s 2% target, with the headline annual rate accelerating from 3.5% in March.

The report highlighted ongoing pressures from energy prices, which have been elevated due to conflict in the Middle East, alongside increases in housing and utilities costs. Goods prices rose 1.2% annually, while services prices increased 2.5%. Meanwhile, the personal savings rate declined to 2.6% of disposable income in April, down from 3.2% in March, suggesting consumers are dipping into savings to maintain spending.

Economic experts noted the strain on household budgets....