The pace of inflation slowed in April, with prices rising modestly and the annual inflation rate edging closer to the Federal Reserve’s target, according to new data released by the U.S. Bureau of Economic Analysis.
The Fed’s favorite inflation indicator, Core PCE, now at a 4 year low. pic.twitter.com/m6zMAqjNdQ
— Will Meade (@thechartdr) May 30, 2025
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The personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred measure of inflation, rose by just 0.1 percent in April.
This marks the second consecutive month of minimal inflation growth, following flat readings in March.
The easing in prices comes even as personal income continued to rise at a faster rate, signaling potential changes in the broader economic outlook.
On a year-over-year basis, prices were up 2.1 percent in April, a slight decline from the 2.3 percent annual rate reported in March.
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The April figure is only one-tenth of a percentage point above the central bank’s stated 2.0 percent inflation target, a level not seen since early in the Biden-Harris administration when inflation began to accelerate.
Core prices, which exclude the more volatile categories of food and energy, also increased by 0.1 percent during the month.
The annual rise in core inflation dropped to 2.5 percent, the lowest year-over-year increase since March 2021.
THE TRUMP EFFECT! pic.twitter.com/fVBwemS0Oz
— The White House (@WhiteHouse) May 30, 2025
The decline in inflationary pressure could signal progress toward the Federal Reserve’s monetary policy objectives.
The central bank has held interest rates steady in recent months after a series of hikes aimed at curbing inflation that surged during the first years of the Biden presidency.
Despite persistent inflation through much of 2022 and 2023, recent data suggests inflation may now be stabilizing.
However, the Fed has made it clear that it will continue monitoring price trends and labor market conditions before making any adjustments to its benchmark interest rates.
The PCE price index is closely watched by economists and policymakers as it reflects changes in the prices of goods and services purchased by consumers.
It is considered to be a more comprehensive measure of inflation than the consumer price index (CPI), which is released separately by the U.S. Department of Labor.
Alongside the inflation data, the report also showed that personal income rose at a faster pace in April, reflecting continued strength in wages and salaries.
While higher income can boost consumer spending, it also has the potential to add inflationary pressure if demand for goods and services outpaces supply.
The Federal Reserve is scheduled to meet in June to reassess its monetary policy stance.
While the slowing pace of inflation may encourage some officials to consider potential rate adjustments later this year, any decisions will be based on a broader review of economic indicators, including employment data and consumer spending trends.
The Fed’s preferred measure of inflation (Core PCE) moved down to 2.5% in April, the lowest level since March 2021. The market is now expecting the Fed to hold rates steady at the FOMC meetings on June 18 & July 30 (@ 4.25-4.50%) but then cut rates 25 bps at the Sep 17 meeting. pic.twitter.com/Mn3us7kUxK
— Charlie Bilello (@charliebilello) May 30, 2025
As of now, inflation appears to be moderating, but Federal Reserve Chair Jerome Powell has previously cautioned against declaring victory too early.
Policymakers are expected to remain cautious amid signs of both economic resilience and lingering inflation risks.
The report comes at a critical time for the U.S. economy as markets, consumers, and policymakers weigh the prospects for sustained growth, price stability, and the potential for interest rate cuts later in the year.
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