March’s Personal Consumption Expenditures (PCE) showed that headline inflation rose 0.3% from February, with the year-over-year reading up from 2.5% to 2.7%.
Core PCE, the Fed’s preferred method which strips out volatile food and energy prices, also rose by 0.3% monthly. The year-over-year reading held steady at 2.8%, stalling progress toward the Fed’s 2% target.
What’s the bottom line? The Fed has been working hard to tame inflation, hiking its benchmark Fed Funds Rate (which is the overnight borrowing rate for banks) eleven times between March 2022 and July 2023. These hikes were designed to slow the economy by making borrowing more expensive, lowering the demand for goods, and thereby reducing pricing pressure and inflation.
The Fed has held rates steady since last September because inflation had been showing good progress lower before stalling in more recent reports. At their meeting in March, the Fed still signaled that three rate cuts are ahead this year. Will they change their tune at their meeting this week? We’ll find out on Wednesday with their Monetary Policy Statement and press conference.