US Core PCE Inflation Expected to Stay Unchanged in April as Fed Eyes September Rate Cut

US Core PCE Inflation Likely to Remain Unchanged in April as Markets Adjust for Fed Cut in September

The US Bureau of Economic Analysis (BEA) will release April’s Personal Consumption Expenditures (PCE) Price Index on Friday at 12:30 GMT. Widely regarded as the Federal Reserve’s preferred inflation gauge, the report is expected to reinforce market expectations of a potential Fed rate cut in September.

April Core PCE Forecasts

Economists project that the core PCE Price Index—which excludes food and energy—will increase 0.1% month-over-month (MoM), following a flat reading in March. On a year-over-year (YoY) basis, core inflation is expected to ease slightly to 2.5% from 2.6%.

Meanwhile, headline PCE inflation is forecast to edge down to 2.2% YoY from 2.3%, suggesting that disinflationary pressures are gradually building despite sticky core prices.

Fed Policy Implications

The data is unlikely to shift the Federal Reserve’s June policy stance, with the central bank broadly expected to keep rates on hold. However, should the inflation trajectory continue lower into the summer, markets increasingly price in a rate cut by September.

“The April PCE release will be pivotal for shaping the Fed’s tone going into the second half of 2025,” analysts suggest.

Key Projections:

MetricForecastPreviousCore PCE (MoM)+0.1%0.0%Core PCE (YoY)2.5%2.6%Headline PCE (YoY)2.2%2.3%

Market Impact

A cooler-than-expected inflation report could support US Treasury yields falling, weaken the US Dollar (USD), and provide a short-term lift to risk assets, including equities and precious metals. Conversely, hotter data could reignite hawkish Fed rhetoric and disrupt rate-cut expectations.

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