April’s PCE data surprised to the upside, with monthly inflation coming in at 0.4% MoM, below market expectations of 0.5%. The reading suggests a modest easing in price pressures compared to March, when PCE surged by 0.7% MoM. On an annual basis, headline PCE inflation remained at 3.8% YoY, in line with forecasts.
Core PCE delivers a positive surprise
Core PCE — the Federal Reserve’s preferred inflation gauge — rose by just 0.2% MoM, beating expectations of 0.3%. This is a clear signal that underlying inflationary pressures are easing faster than markets had anticipated. On a yearly basis, Core PCE stood at 3.3% YoY, matching consensus estimates, but combined with the softer monthly print, markets may interpret the data as opening the door to earlier Fed rate cuts.
GDP revised lower
The second estimate of Q1 2026 GDP disappointed, coming in at 1.6% QoQ versus expectations of 2.0% and the previous reading of 2.0%. The downward revision confirms that the U.S. economy is slowing more than previously expected.
Market implications
Taken together, the data paints a picture of a milder stagflationary risk environment. However, inflation remains the market’s primary focus, and today’s relatively reassuring reading is supporting a rebound in the US100 index visible just minutes after the release.
Source: xStation
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