#PCEMarketWatch

The latest Personal Consumption Expenditures (PCE) inflation data indicates a continued slowdown in U.S. inflation, bringing it closer to the Federal Reserve's 2% target.

Key Highlights:

Headline PCE Inflation: In April, the PCE index rose by 0.1%, marking the softest two-month increase since the pandemic began in 2020. The annual inflation rate decreased to 2.1%, matching its lowest level since the pandemic and nearing the Fed’s target.

Core PCE Inflation: Excluding food and energy, the core PCE index also increased by 0.1% in April. The annual core inflation rate slowed to 2.5%, the lowest since early 2021.

Market Reactions:

Stock Market: Despite the positive inflation data, major stock indices experienced declines. The Dow Jones Industrial Average and S&P 500 were set to decline following President Trump's accusations against China, which raised concerns about ongoing trade tensions.

Treasury Yields: The yield on the 10-year Treasury note increased slightly to 4.4%, reflecting cautious optimism in the bond market.

Economic Outlook:

While the recent data suggests progress toward the Fed's inflation goals, economists caution that ongoing trade wars and tariffs could reverse this trend. Tariffs, often absorbed by U.S. businesses, may lead to higher consumer prices or reduced profits.

The Federal Reserve is likely to maintain its current interest rate stance amid these developments, with the next policy meeting scheduled for June 17-18.