A measure of inflation more closely watched by Federal Reserve officials picked up in April, reflecting the difficult road ahead for policymakers as they weigh whether to raise interest rates again to curb price increases. stubborn prices.
Personal consumption expenses index rose 4.4 percent in April of a year earlier. That was a slight increase from March, when prices rose 4.2 percent annually. Still, prices aren’t rising as fast as they were in February, when the index rose 5.1 percent annually.
A “core” measure that tries to gauge underlying trends in inflation excluding volatile food and energy prices rose 4.7 percent in the year to April, up from 4.6 percent in March. .
The core measure rose 0.4 percent in April from the previous month, up from 0.3 percent in March. That was a bit faster than some analysts had expected. Core inflation had been rising at a faster pace earlier in the year, rising 0.6 percent in January.
The data reflected the recent moderation in price gains compared to previous months, but also underscored just how stubborn inflation has been. That could complicate the way forward for Fed officials, who began raising interest rates last year to cool the economy and slow price growth.
The Fed raised interest rates by a quarter point earlier this month, the tenth consecutive increase since last year. Policymakers have hinted that they might postpone another increase to their next meeting on June 13-14. Minutes from the latest Fed meeting showed officials were split on their next move, with several favoring a pause.
“Several participants noted that if the economy evolves in accordance with their current outlook, then further policy reaffirmation may not be necessary after this meeting,” the minutes read.
Still, central bank officials have so far kept the door open to another rate hike next month, reiterating that they will continue to monitor incoming data on inflation, the labor market and the tightening of credit conditions from recent bank failures.
A big wild card for the Fed is policy brinkmanship on the debt ceiling. The White House and Republicans are trying to reach an agreement to increase the borrowing limit before June 1, when the United States could run out of cash to pay all its bills on time. If the debt limit is not raised in time to prevent a US debt default, the economy is likely to go into a tailspin.
Policymakers discussed that possibility in May, according to minutes of that meeting, with many officials saying it was “essential that the debt limit be raised in a timely manner” to avoid risking severe damage to the economy and rocking financial markets. .
Christopher Waller, Governor of the Federal Reserve, said in a speech on Wednesday that another rate increase might be warranted in June, but that it was too early to tell.
“Whether we should go up or down at the June meeting will depend on how the data comes in over the next three weeks,” Waller said.
Although Fed officials noted that inflation has eased in recent months, they called it “unacceptably high” and far from the central bank’s 2 percent target.
They have also recognized a certain cooling in the labor market, since the number of job offers have decreased recently. But Fed officials have said labor market conditions are still too favourable, pointing to strong monthly job gains, steady wage growth and an unemployment rate near historically low levels.
Policymakers have repeatedly said that the labor market will need to ease for inflation to return to a normal level. Officials acknowledge that wage gains did not initially cause the jump in price increases, but worry that rapidly rising wage gains will make it harder to control inflation.
“A relaxed labor market, to help our fight against inflation, doesn’t have to mean a recession or big job losses,” Waller said. “But we need to see more easing than we have seen to help ease the inflation rate.”