A key inflation indicator rose 3.1% faster than expected in April as price pressures mounted in the fast-growing US economy, the Department of Commerce reported on Friday.

The core consumer spending index is expected to rise 2.9% after rising 1.9% in March. Federal Reserve officials consider the measure to be the best measure of inflation, despite observing a number of metrics.

Under its price stability mandate, the Fed considers 2% healthy, although it has pledged to keep the average higher than usual in the interests of promoting full employment.

The index tracks price movements in a wide variety of goods and services and is generally considered to be a more comprehensive measure of inflation because it tracks changes in consumer behavior and has a broader scope than the Department of Labor’s consumer price index. The CPI rose 4.2% in April.

Last month, core PCE rose 0.7%, also faster than the expected 0.6%.

Including volatile food and energy prices, the PCE benchmark index rose 3.6% year-on-year and 0.6% compared with March.

“Inflationary pressures could worsen before they improve,” wrote Jefferies economist Aneta Markowska, who pointed out that declining retail inventories could drive prices higher. She added that a shift in consumer spending from goods to services should ultimately ease inflationary pressures.

Despite the hot inflation rate, government bond yields were mostly lower while stocks were higher on Memorial Day weekend.

In other business news, the Chicago manufacturing reading was 75.2, above expected, its highest since November 1973. Also, the University of Michigan consumer confidence reading fell to 82.9 in May, just below Estimation of 83 and below the previous 88.3.

This rise in inflation was accompanied by a sharp slowdown in personal income, which fell by 13.1%. But that was actually less than the 14% estimate. Personal income was up 20.9% in March after the last round of government economic reviews.

Despite the $ 3.2 trillion drop in personal income, the savings rate remained up at 14.9%. Consumer spending is estimated to have increased by 0.5%.

Disposable personal income after taxes and other withholding taxes fell 14.6%.

Despite the steady rise in inflation, most Fed officials remain reluctant to change their policies.

The central bank buys at least $ 120 billion worth of bonds every month and has anchored the benchmark’s short-term interest rates close to zero despite the booming economy.

There have been some signs lately that the Fed is at least ready to talk about slowing the pace of asset purchases, but real action is likely months away. Central bankers see the ongoing price pressure due to supply chain bottlenecks and comparisons with the previous year, when the economy was largely off, as temporary.

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