(AURN News) – The battle against stubbornly high inflation is facing fresh headwinds as the latest economic data shows the U.S. economy maintaining robust momentum, complicating the Federal Reserve’s efforts to engineer a slowdown and tame price pressures.
The Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation gauge, rose 2.7 percent in March compared to a year earlier, according to a recent Commerce Department report. Adding to the Fed’s challenges, the Gross Domestic Product (GDP) report for the first quarter of 2024 showed an increase of 1.6 percent, the government reported last week. The growth was fueled by a $407.1 billion jump in personal income and a 3.1 percent rise in disposable income, pointing to strong consumer spending. The mixed data dashes hopes for rate cut anytime soon by the Fed. Many analysts had anticipated rate cuts this year after inflation showed signs of moderating in 2023. However, the timing of potential cuts continues to be pushed back as price pressures persist.
Earlier this month, AURN News reported that Federal Reserve Chair Jerome Powell reiterated the central bank’s commitment to restoring 2 percent inflation, its long-standing target. “Of course, the outlook is still quite uncertain, and if incoming data suggest that inflation is more persistent than I currently expect it to be, it will be appropriate to hold in place the current restrictive stance of policy for longer. I am fully committed to getting inflation back to 2 percent,” Powell told the International Research Forum on Monetary Policy in Washington.
The Fed has raised interest rates 11 times between March 2022 and July 2023. From December of last year to today, the Fed has held rates steady in an effort to douse the highest inflation in 40 years. However, the latest numbers cast doubt on whether the pauses have been enough to meaningfully restrict economic activity and relieve price pressures.
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