US PCE Inflation Data Comes In At 2.3%, Will The Fed Cut Rates?

The much-anticipated March PCE inflation data has come out in line with expectations, leaving market participants wondering about the Federal Reserve’s next move. This inflation metric is the Fed’s most preferred inflation gauge and suggests that Chair Jerome Powell and the FOMC will likely keep rates unchanged at the May meeting.

US PCE Inflation Data Comes In At 2.3%

U.S. Bureau of Economic Analysis data show that the March U.S. inflation data came in at 2.3% year-over-year (YoY), in line with expectations, and 0% month-over-month.

Meanwhile, the core PCE data came in at 2.6% YoY, the lowest since June 2024. This development is significant as this data is what the Fed uses as its primary inflation gauge and could determine its decision at the May FOMC meeting.

With the PCE inflation data stalling, Powell and the FOMC look unlikely to cut interest rates at the May meeting holding between the 6th and 7th. It is worth mentioning that the JOLTS job opening hit a 4-year low, which strengthened the case for a Fed rate cut. Powell and the committee are known to always consider the labor market first when deciding to ease monetary policies.

However, the Fed Chair seems more concerned about Trump’s tariffs at the moment and the inflationary pressures that they could cause, which is another reason they seem hesitant to cut rates anytime soon.

In line with this, traders are betting against a Fed rate cut at the May FOMC meeting. CME FedWatch data shows that there is a 92.2% chance that Powell and the FOMC will keep rates unchanged. Furthermore, Polymarket traders are also betting against a rate cut. Data from the prediction market shows there is a 93% chance that rates remain unchanged.

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