Inflation cooled in March, but interest rates are expected to remain high.
Inflation cooled a bit last month, but don’t expect interest rates to drop, too.
Prices rose by 2.3% year over year in March, according to the latest Personal Consumption Expenditures data released Wednesday. That’s down from the 2.5% annualized increase in February but slightly higher than the forecasted 2.2% increase.
The PCE is the Federal Reserve’s preferred gauge of inflation.
The numbers came out this morning following the release of March’s Gross Domestic Product data, which showed the economy contracting at a rate of 0.3% in the first quarter. The contraction was largely attributed to businesses and people “panic buying” imported goods before President Donald Trump’s tariffs took effect.
However, consumer spending also slowed considerably in the first quarter, according to the GDP report. Resilient consumer spending has helped buoy the economy amid stubborn inflation and an uptick in unemployment.
The latest data is still unlikely to change the Federal Reserve’s vote next week on interest rates as it monitors how tariffs and political turmoil could affect the health of the economy. Experts expect the Fed will hold rates steady next week, as it’s done since January after lowering them twice last fall.
Fed Chair Jerome Powell has come under intense pressure from the Trump administration to lower rates, although Trump backed off on threats to fire Powell after the stock market responded negatively last week.
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