The main inflation barometer preferred by Federal Reserve rose to a three-year high in April and it could rise even higher, posing a stiff challenge for households, businesses and the broader U.S. economy.
The personal-consumption price index rose by 0.4% last month, the fifth large increase in a row.
The yearly rate of inflation climbed to 3.8% from 3.5% in the the prior month to mark a three-year high.
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Just one year ago, inflation had slowed to a 2.3% rate. Yet prices began to rise again, first due to the Trump tariffs, and more recently, the surge in gas prices tied to the Iran conflict.
In a bit of good news, a narrower measure of inflation that omits volatile food and energy costs, known as the core PCE, rose 0.2%. That was less than Wall Street expected.
The rate of core inflation in the 12 months that ended in April registered 3.3%, a tick higher compared to the prior month.
Both inflation measures show prices rising a lot faster the Fed’s 2% annual goal five years after the central bank launched an effort to return the U.S. to the low inflation levels that prevailed before the pandemic.
Stubborn inflation is also preventing the Fed from cutting interest rates
The Fed views the PCE index as the most accurate barometer of U.S. inflation trends.
