Inflation accelerated again last month, according to the personal consumption expenditures price index. The report signals that the Federal Reserve’s fight against rising prices is not over.
The Fed paused its rate hikes this week, but the new data suggests that break may be short-lived. Prices continued to climb sharply, keeping pressure on policymakers.
The PCE index is closely watched by the Fed as its preferred inflation gauge. Last month’s increase shows inflation remains stubborn despite earlier rate increases.
Central bank officials have said they need clear evidence that inflation is cooling before ending their tightening cycle. The latest figures do not provide that evidence.
Markets had hoped the pause signaled a turning point. Rising prices complicate that view and raise the likelihood of further rate hikes later this year.
Consumers continue to face higher costs for everyday goods and services. Persistent inflation erodes purchasing power and weighs on household budgets.
The Fed must now balance the risk of overtightening against the risk of letting inflation become entrenched. The next policy meeting will draw close attention from investors and economists.
