📍Inflation PCE rises sharply for the first time since 2023

📌 Headline PCE increases +0.7% MoM and +3.5% YoY - the highest since May 2023.
- The strongest increase in nearly 3 years causes Wall Street to reconsider the story of “disinflation moving in the right direction.”
- The main contributor to the rise is gasoline and energy goods. Spending on gasoline and other energy goods increased to $81.3 billion - the highest among March expenditure categories.
📌 Core PCE is also quite bad: up +0.3% MoM and +3.2% YoY - exactly as expected but higher than the previous month.
📌 Supercore PCE increased +0.3% MoM and +3.4% YoY. Still high compared to the Fed’s 2% target.
The concerning part isn’t that hot inflation data has returned, as the figures are almost all in line with expectations. The issue is the direction of inflation: headline from 2.8% to 3.5%, core from 3.0% to 3.2%.
The market has priced in this data from March’s CPI and PPI. But PCE is the Fed’s preferred measure, so the main impact still depends on policy expectations.
📌March PCE does not confirm that inflation from 2021-2022 has returned. But it’s clear that disinflation has been halted. Powell’s time as Fed Chair is now measured in days. Waiting to see what Warsh will say after taking office.