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US PCE Inflation Falls to 2.3%: Will the Fed Cut Interest Rates?
The U.S. Personal Consumption Expenditures (PCE) inflation rate for March came in at 2.3% year-over-year, just as expected. This suggests the Federal Reserve will likely keep interest rates the same for now.
The PCE is the Fed’s favorite measure of inflation. With the latest numbers showing little change, it's unlikely the Fed will cut rates during their meeting on May 6–7. The core PCE, which removes food and energy prices, rose 2.6% over the past year — its lowest level since June 2024.
Even though inflation is steady, there are signs of a slowing job market. A recent report showed job openings are at a four-year low, which might support the case for lowering rates.
However, the Fed, led by Chair Jerome Powell, usually focuses more on job market conditions. Right now, Powell is also concerned about possible inflation from new tariffs introduced by former President Trump. Because of this, the Fed seems cautious and is not in a hurry to reduce interest rates.