Core PCE Inflation Holds Steady at 2.5% in April, Supporting Fed’s Wait-and-See Approach — Evening Brief – 05.30.25 

The Core PCE Price Index, the Federal Reserve’s preferred inflation gauge, rose 0.1% in April, in line with market expectations and March’s revised +0.1% (up from 0.0%), according to the Bureau of Economic Analysis. Year-over-year, Core PCE, excluding food and energy, increased 2.5%, aligning with expectations but down from March’s revised +2.7% (from +2.6%). 

The headline PCE Price Index, including food and energy, also rose 0.1% month-over-month, meeting consensus and up from March’s 0.0%. Annually, it grew 2.1%, matching forecasts but slowing from March’s 2.3%. Unlike the Consumer Price Index, the PCE report, which captures shifts in consumer behavior, showed minimal impact from early April tariffs, reinforcing its role in the Fed’s inflation analysis. 

Consumer purchasing power strengthened, with personal income rising 0.8% in April, surpassing the +0.3% consensus and March’s revised +0.7% (from +0.5%). Personal Consumption Expenditures grew 0.2%, in line with expectations but down from March’s +0.7%, reflecting a slowdown from tariff-driven spending. The personal saving rate climbed to 4.9% from 4.3%, the highest in seven months. 

Former Kansas City Fed President Esther George underscored the Fed’s cautious stance, telling CNBC: “Today’s inflation report tells us that inflation is not accelerating. That is good news. But it doesn’t tell us we are making further progress toward the Fed’s 2% target.” 

With the Fed firmly in data-dependent mode, markets appear stuck in a holding pattern, awaiting a clear catalyst. While trade policy uncertainty—particularly surrounding tariffs—continues to stir short-term volatility, a meaningful shift in employment or inflation data may be necessary to move the needle on rate-cut expectations.