#PCEMarketWatch PCEMarketWatch: Inflation Cools, but Trade Tensions Keep Markets on Edge**

The April **PCE inflation data**—the Fed’s preferred gauge—showed progress with headline inflation at **2.1% annually** (0.1% monthly), aligning with expectations. Core PCE (ex-food/energy) also eased to **2.5%**, signaling moderating price pressures .

**Why it matters:**

- **Fed’s dilemma**: Despite inflation nearing the 2% target, the Fed remains cautious. Strong job data (280K jobs added) and elevated services inflation (3.3%) suggest resilience, reducing urgency for rate cuts. Markets now price in only **two 2025 cuts**, likely starting in September .

- **Trade wildcard**: Stocks wobbled as U.S.-China trade talks stalled, and Trump’s tariff threats (including a delayed 50% EU levy) reignited uncertainty. Gap (-13.5%) and chip stocks like Marvell (-4%) felt the heat, while AI-driven names (NVIDIA, UiPath) rallied .

- **Consumer paradox**: Personal income surged **0.8%** (vs. 0.3% expected), but spending grew just 0.2%. Savings rose, hinting at economic caution despite tariff reprieves .