US PCE Inflation Eases to 2.4%, Cementing Rate Cut Bets
Core PCE printed at 2.4% year on year, below expectations, giving the Federal Reserve cover to deliver two rate cuts before the end of the year.
US core PCE inflation came in at 2.4% year on year for April, below the 2.5% consensus and a notable step down from the prior reading. The headline measure printed at 2.3%, also below expectations. Personal income and spending data both matched estimates, painting a picture of a US economy that is cooling at the edges without breaking.
Market reaction
- Two-year Treasury yields fell 7 basis points to 4.32%.
- The dollar index slipped 0.3% before recovering on month-end flows.
- Equities extended their winning streak, with the S&P 500 closing at a record.
What it means for the Fed
A 2.4% core print, combined with last week's softer-than-expected payrolls, gives the Fed clear room to deliver a 25 basis point cut at its September meeting. Markets are now pricing 47 basis points of easing by year-end, up from 38 a week ago.
The bigger question is what happens in 2027. With the labour market loosening only gradually and tariff-related goods inflation now fading, the case for a sustained easing cycle — rather than an insurance cut or two — is starting to build.