Inflation rebounded in March in the United States, according to the PCE index, favored by the American central bank, the Fed, and published a few days before its next meeting, which should encourage it to wait before starting to lower rates.
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Price increases accelerated to 2.7% year-on-year in March, compared to 2.5% in February, according to the PCE index released Friday by the Commerce Department.
Analysts were expecting an acceleration to just 2.6%, according to the MarketWatch consensus.
Over just one month, however, inflation remained stable at 0.3% as expected.
So-called core inflation, which excludes volatile food and energy prices, also remains stable, also at 0.3% over one month, and 2.8% over one year.
“While inflation has fallen more than 60% from its peak,” the release of these figures “reinforces the importance of our continued efforts to reduce costs,” said Lael Brainard, Joe’s top economic adviser. Biden, in a White House press release.
Now 6 months before the presidential election, the rebound in inflation is taking a political turn.
Lael Brainard thus assured that “President Biden is fighting to reduce the biggest bills that families face. (…) This contrasts sharply with the Republicans in Congress.
“High” inflation
Household income recorded stronger growth in March than in February, +0.5% compared to +0.3%. But the increase in spending remained the same, at +0.8% over one month.
These figures signal “that the economy continues to develop and that inflation is high,” comments Rubeela Farooqi, chief economist for High Frequency Economics.
The PCE inflation index is the one that the American central bank (Fed) wants to reduce to 2%. This rebound should encourage patience, and to maintain its rates “longer” at their current level of 5.25-5.50%, the highest in more than 20 years, to avoid seeing prices skyrocket. new, adds the economist.
Another measure of inflation, the CPI index, on which pensions in the United States are indexed, also continued to accelerate last month, to 3.5% over one year.
This led Fed Chairman Jerome Powell to warn that it would probably take “longer than expected” to have confidence in the sustainable return of inflation towards the 2% objective.
The markets which, just a few weeks ago, were counting on a first rate cut from June, are now expecting it more for September, or even November, according to CME Group’s estimate.
Especially since the job market remains strong, and the unemployment rate very low, at 3.8% in March.
Growth has slowed
The Fed meets Tuesday and Wednesday, and analysts will be watching for any indication it may give on its intentions.
One figure, however, came on Thursday to show that the Fed’s actions to lower inflation are not in vain: that of economic growth in the first quarter, which slowed significantly.
At 1.6% at an annualized rate, compared to 3.4% in the 4th quarter of 2023, the growth of gross domestic product (GDP) even fell to its lowest level in almost two years, after a year 2023 which had nevertheless surpassed all hopes.
This could help tip the Fed’s balance in the other direction, and convince it not to wait too long before starting to lower rates either. Because if it acts too late, the economy, and therefore employment, could suffer.
In April, consumer confidence in the United States remained relatively stable, according to the final estimate from the University of Michigan also published on Friday, between uncertainties linked to the presidential election in November and a rebound in inflation.
The level of confidence thus deteriorated among older households and Republican voters, but improved for younger ones, as well as among Democratic and independent voters.
