#PCEMarketWatch

📉 PCE Inflation Nears Fed Target: Markets Brace for Next Move

The latest Personal Consumption Expenditures (PCE) data delivered a dose of optimism to markets, signaling that inflation may finally be cooling to the Federal Reserve’s 2% target.

In April, both headline and core PCE inflation rose just 0.1%—a modest climb that matched economists' expectations. On a year-over-year basis, headline inflation slipped to 2.1%, while core PCE, which strips out food and energy, fell to 2.5%, down from 2.7% in March.

Much of the relief came from declining goods prices and a cooling in service sectors, particularly shelter, which has been a major inflation driver. Goods prices actually fell 0.4% year-over-year, and shelter inflation eased to a 4.2% annual pace.

But it’s not all smooth sailing.

A U.S. appeals court has revived some previously blocked tariffs, while trade tensions—especially with China—are heating up again. Economists warn these frictions could add pressure to inflation just as it shows signs of letting up.

Markets reacted cautiously: futures on the S&P 500 and Nasdaq dipped slightly, gold slipped, oil gained, and the 10-year Treasury yield held steady. Bitcoin, interestingly, edged up to around $106K—possibly riding safe-haven sentiment amid economic uncertainty.

With inflation softening but global risks re-emerging, all eyes are on the Fed. For now, policymakers are likely to keep interest rates unchanged as they await more data, including upcoming PMI and construction spending reports.

Bottom line? Inflation is cooling—but geopolitical and trade risks may yet reheat the pot.