The Federal Reserve’s preferred inflation gauge showed only modest price increases in April, as the Personal Consumption Expenditures (PCE) index rose by just 0.1% for the month.
That monthly result lowered the annual PCE inflation rate to 2.1%, the weakest reading so far in 2025 and very near the Fed’s 2% objective. Core PCE, which strips out volatile food and energy costs, also advanced 0.1% month over month and stood at 2.5% on an annual basis, indicating that underlying price pressures remain slightly above the central bank’s target.
Although the inflation data were encouraging, household activity suggested a more cautious tone. Consumer spending growth slowed sharply to 0.2% in April, down from 0.7% in March. At the same time, the personal saving rate rose to 4.9%, its highest level in nearly a year. Taken together, the weaker spending and higher savings point to consumers building more financial buffers amid lingering economic uncertainty.