Core personal consumption expenditure index (PCE), an important data that sheds light on the economic outlook of the USA, has been announced for March. According to these data, core PCE, which is closely followed by the Federal Reserve, increased by 2.8 percent on an annual basis in March, exceeding expectations. On a monthly basis, there was an increase of 0.3 percent.
INCREASE EXCEEDING EXPECTATIONS: CORE PCE 2.8 PERCENT
Core PCE data for March came in above the forecast level, with a 2.8 percent increase year-on-year. There was an increase of 0.3 percent on a monthly basis, which was a result in line with expectations.
CONSUMER EXPENDITURES AND FED’S APPROACH
Despite high price levels, consumers were found to have a tendency to spend. Personal spending exceeded forecasts, increasing by 0.8 percent. These data are important in terms of the Federal Reserve’s (FED) strategy of reducing inflation to the 2 percent target and shaping its interest policy.
FED’S EXPECTATIONS AND INTEREST POLICY
The FED is expected to keep interest rates constant at 5.25-5.50 percent at its meeting in May. The tightening cycle, which started as of March 2022, continues with the prediction that interest rate cuts may come to the agenda in the second half of this year.
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