The central bank’s core inflation gauge rose 0.3% in March, as expected

Inflation picked up again in March despite a rise in one-year interest rates, according to closely watched economic data released Friday by the Federal Reserve.

The personal consumption expenditures price index, excluding food and energy, rose 0.3% for the month, according to Dow Jones estimates. On a year-over-year basis, so-called core PCE rose 4.6%, slightly above expectations for 4.5% and down 0.1 percentage point from February.

Headline PCE, which includes volatile food and energy components, rose just 0.1% for the month, equivalent to a 4.2% annual increase, up from 5.1% in February. That measure rose to 7% in June 2022, the highest level since December 1981.

The headline number was soft as energy prices fell 3.7% for the month, while food costs fell 0.2%. Prices of goods fell 0.2%, while services rose 0.2%.

In another key inflation measure for the central bank, the employment cost index rose 1.2% in the first quarter, beating estimates of 1%.

Inflationary pressures were reflected in consumers’ willingness to spend. Personal income rose 0.3% for the month, but consumer spending was flat as expected.

Although annual rates are lower than the peaks reached in 2022, they are still above the central bank’s 2% target, and further evidence that price rises are sticking around more than policymakers expected.

Since March 2022, the central bank has raised its benchmark interest rate nine times for a total of 4.75 percentage points. Markets widely expect the rate-setting Federal Open Market Committee to approve another quarter-percentage-point increase at next week’s meeting, ahead of a look at the impact of policy tightening on the $26.5 trillion US economy.

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