The numbers: A measure of inflation preferred by the Federal Reserve rose just 0.2% in April — the smallest increase in a year and a half — largely because of a decline in gas prices. But there were other hints that a surge in inflation might be abating.
The rise in the so-called personal consumption price index was the smallest since November 2020.
The rate of inflation over the past year, based on the PCE, slowed to 6.3% in April from a 40-year high of 6.6% in March. That was also the first decline since November 2020.
A narrower measure of inflation that omits volatile food and energy costs, known as the core PCE, rose a somewhat higher 0.3% in April.
The increases in the core rate of inflation in the last three months, however, were the smallest since last summer.
The rate of core inflation in the past year, what’s more, slowed to 4.9% from 5.2%. It’s the second straight decline. The last time the core rate had back-to-back declines was in the first few months of the pandemic in early 2020.
The Fed views the PCE index, the core rate in particular, as the most accurate measure of U.S. inflation. It’s more comprehensive and takes into account when consumers substitute cheaper goods for more expensive ones — say ground beef for filet mignon or frozen spinach for fresh.
Big picture: Most Americans have never endured such high inflation and it’s caused plenty of angst on Main Street, Wall Street and Washington.
The Federal Reserve is moving to swiftly raise a key short-term interest rate that it kept near zero during most of the pandemic to try to quell inflation.
The resulting increase in interest rates on car loans, mortgages and business lending is likely to slow the economy, though Fed officials insist they can bring down inflation without triggering a recession.