Topline
Inflation moderated as expected in March, according to data released Wednesday morning, with President Donald Trump’s tariffs looming large as many economists expect the trade policy to complicate the slow burning descent toward historically palatable inflation.
The Federal Reserve’s favored inflation yardstick has been above its 2% target for 49 consecutive … More
Key Facts
The Commerce Department’s personal consumption expenditures (PCE) index rose 2.3% from March 2024 through last month, slightly exceeding consensus economist forecasts of 2.2% headline PCE inflation.
Core PCE inflation, the Federal Reserve’s preferred inflation measure as it excludes often volatile food and energy expenditures, was 2.6% in March, matching estimates of 2.6%.
Core PCE inflation was its mildest since March 2021 last month, though it remains above the Fed’s 2% goal as it has been since early 2021.
Headline PCE decreased less than 0.1% from February to March on a seasonally adjusted basis and core PCE climbed less than 0.1% last month, in line with projections of no headline increase and a 0.1% core increase.
What We Don;t Know
How Trump’s trade war will impact inflation moving forward. Trump wrote to social media last week he believes “there is virtually No Inflation.” But economists view tariffs as inflationary, projecting inflation to tick back up as the levies take hold. Goldman Sachs economists project core PCE inflation will come up nearly a full percentage point to 3.5% in August, which would mark the worst inflation since September 2024.
Big Number
0.3%. That’s how much the U.S. economy contracted during 2025’s first quarter, according to the Commerce Department’s annualized measure of gross domestic product released earlier Wednesday. That’s the weakest economic expansion since Q1 2022, as many Americans express recession angst.
What To Watch For
The Fed’s rate-setting Federal Open Market Committee will meet May 6-7. Trump has repeatedly demanded the central bank lower rates, but financial markets aren’t so confident. Traders price in just 9% odds of a rate cut at the May conclave, according to CME Group’s FedWatch Tool tracking derivatives contracts betting on monetary policy decisions.
