PCE inflation in the USA in March 2025 amounted to 2.3 percent. year to year, i.e. fell from 2.7 percent. in February – The Economic Analysis Office of the Trade Department said on Wednesday. This is a reading slightly higher than forecasts (2.2 percent), but it is worth noting that the reading for the previous month has been revised (by 0.2 percentage points).
The base PCE indicator, which does not take into account food and energy prices, decreased to 2.6 percent. year to year with 3 percent a month earlier. This reading is consistent with the forecasts, but here also the February result was revised by 0.2 percentage points. The base inflation has fallen strongly in the last two years, but still exceeds the fed target, which is 2 percent.
In a monthly basis, the main inflation rate of PCE was 0 percent, i.e. according to forecasts. In February it was as much as 0.4 percent. (Revision up with 0.3 percent originally administered), which could largely result from calendar effects (increases in price lists at the beginning of the year). The monthly dynamics of PCE base inflation surprised: it was also zero, price increases by 0.1 percent. (There were 0.5 percent in February, there was also a revision, 0.4 percent were originally given).
The data of the Economic Analysis Office of the Trade Department published today also shows that in March 2025. The expenses of American consumers increased by 0.7 percent. month to month. This reading is better than the forecast 0.5 percent. and from the result of February (0.5 percent, revision up with 0.4 percent). According to today's data Americans' income in March grew by 0.5 percent. in a monthi.e. slightly faster than the forecasted 0.4 percent, but slower than in February (0.7 percent, revision from 0.8 percent).
Fed will wait with discounts?
This, next to information from the labor market, key data for the assessment of the condition of the American economy. The decrease in PCE inflation should give the Fed arguments for returning to interest rate reduction. The latest GDP data, which we met earlier on Wednesday, may also be important: according to the initial reading, there was a decrease in the American GDP by 0.3 percent. in a benchmate (this is the first negative result in three years).
The American federal reserve in January “turned on the pause” and has not changed interest rates since then: the Fed Funds range is 4.25-4.50 percent. Earlier, in three movements, the Fed reduced the range with a rate of 1 percentage point. (Discounts began in September 2024).
According to market expectations, the next cut may come in June. The market is almost sure that there will be no foot reductions at the meeting of May 7. About 70 % The probability of reduction 0.25 percentage points It is attributed to a meeting of bankers, which is scheduled for June 18. Currently, the market unanimously expects that at the end of the year the rate of the rate in the US will be 1 percentage point. lower than today, i.e. it will fall to 3.25-3.50 percent.
What is PCE inflation. This is a key measure for the fed
PCE (Personal Consumption Expenditures) is a measure of changes in the prices of goods and services purchased by consumers. It is an indicator preferred by a federal reserve for inflation monitoring, because it is believed that it better reflects real inflation and price pressure in the economy. The averaged Fed inflation target is 2 percent.
The difference between CPI and PCE consists in the scope and how to weigh prices in both indicators. CPI measures changes in the prices of goods and services consumed by municipal households and is focused mainly on consumer purchasing experiences. PCE also includes expenses not living in cities and has a wider range of goods and services. In addition, PCE uses a different weighing methodology, which is to better reflect changes in consumer spending habits, adapting to changes in prices by shifting in expenses between various goods and services.
