🇺🇸 US Inflation Accelerates as Consumer Spending Softens

April macro data delivered an uncomfortable signal for the Fed: inflation is picking up again, while consumers are becoming more cautious.

Key points:

• The PCE price index — the Fed’s preferred inflation gauge — rose 3.8% YoY, the highest level since 2023.
• Core PCE, excluding food and energy, increased 3.3% YoY.
• Real consumer spending grew only 0.1% MoM, showing signs of weaker demand.
• Q1 US GDP growth was revised down from 2.0% to 1.6% annualized.
• Energy prices added extra pressure amid the conflict with Iran.
• Consumer sentiment has fallen to a record low.

Takeaway:
The Fed is facing a difficult mix: growth is slowing, but inflation remains sticky. This reduces the chances of a quick policy pivot and may force markets to price in higher rates for longer — or even the risk of another rate hike.