Core PCE inflation remains above target despite a slowdown in March

In the United States, the personal consumption expenditures (PCE) index rose by 2.3% from March 2024 to April 2025, slightly surpassing economists' expectations. This index serves as a key measure of inflation used by the Federal Reserve. Additionally, core PCE inflation, which excludes the often volatile food and energy prices, was reported at 2.6% in March 2025, mirroring the projections made by analysts. This figure signifies the mildest core inflation rate since March 2021, yet it remains significantly above the Federal Reserve's target of 2%, a level that has not been achieved since early 2021. The report from the Commerce Department also indicated that headline inflation experienced a minor decrease of less than 0.1% from February to March on a seasonally adjusted basis. Meanwhile, core PCE inflation rose by less than 0.1% in the same time frame, adhering closely to expectations. These inflation figures emerge amidst concerns related to President Donald Trump's tariffs, which were anticipated to complicate the descent toward more historically acceptable inflation levels. The implication of these tariffs on future inflation remains uncertain, raising concerns among economists who worry about their potential effects on the ongoing trade situation. As the economy grapples with the consequences of these tariffs and other external factors, traders are currently pricing in only a 9% chance of a rate cut during the upcoming Federal Reserve meetings in May. The economic landscape has also seen contraction, with the U.S. economy shrinking by 0.3% in the first quarter of 2025, according to annualized measures reported by the Commerce Department. This underscores the economic challenges ahead, which could be intensified by trade policies and fluctuating inflation rates.