The Fed’s favorite inflation gauge rose 5.2% in March as worker pay fell further behind

A Safeway store in San Anselmo displays canned goods on April 11, 20,22.
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The Federal Reserve’s inflation gauge was boosted in March by a measure it uses to determine inflation. This likely confirms the Federal Reserve’s plan to raise interest rates half-a-percent in May.

From a year earlier, the core personal consumption expenses price index, which accounts for behavior and market dynamics by measuring costs that consumers have to pay on many items, rose 5.2%. according to the Bureau of Economic Analysis.

This was however slightly lower than the February reading of 5.3%, which was the highest recorded since April 1983.

The 5.3% Dow Jones forecast for March was lower than March’s. Core prices increased 0.3% month over month, which is in line with the forecast, giving some hope for inflation peaking.

Incorporating volatile energy and food prices, the PCE Index climbed 6.6% in February, marking the fastest rate since 1982. Inflation headline was 0.9% higher than February’s 0.5% rise, which is much more rapid than previous 0.5% increases.

An additional inflation measure the employment cost indexThe Bureau of Labor Statistics reported that the indices rose 1.4% from the preceding quarter. That level was 0.1% according to the Dow Jones estimation.

The index which tracks total nongovernmental workers’ compensation costs was up 4.5% in the past year. Although the gain was slightly lower than the 4.9% increase recorded the quarter before, it separated out salaries and wages.

Andrew Hunter (senior U.S. economist, Capital Economics) wrote: “The larger story from today’s data releases was additional evidence that inflation has starting to ease.”

These data points are not enough to prove the assertion that inflation is running at a much faster paceThe Fed does not want to increase rates more than they would. Markets expect 50 basis points of an increase at the Federal Open Market Committee meeting next week, and additional increases to come.

Hunter noted that Hunter’s leveling of inflation data supports his view that inflation may fall faster than Fed officials expect.

A BEA Thursday release revealing that Gross Domestic Product, the most comprehensive measure of U.S. economy growth, was up, made it more challenging for Fed staff. fell at a 1.4% annualized paceIn the first quarter.

Although the drawback resulted mainly from falling inventories and a record U.S. deficit in trade, it was unlikely to occur again in the next quarters. nonetheless raised some concernsThe economy appears to be cooling, if not in recession.

Inflation control efforts by the Fed would be aided further by rising interest rates. They are trying to reduce inflation that has not been seen since the 1980s, a period of high growth but low prices.

However, the rising costs of employment are not keeping up with inflation.

After an increase of 0.1% in February, real disposable income (or the income that is not subject to taxes) fell 0.4% in March. While real spending increased by 0.2%, headline income was up 0.5%.

Americans were confronted with falling income and rising costs. They began to dip into savings. From 6.8% in February, the personal savings rate (or how much is saved as an after-tax portion of income) fell to 6.2%.

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