By Lucia Mutikani
WASHINGTON (Reuters) – Consumer prices rose in April in the United States and the core inflation measure exceeded the Federal Reserve’s 2% target with its highest annualized reading since 1992, reflecting the rebound in domestic demand after the reopening. of the economy.
The robust inflation readings reported by the Commerce Department on Friday had been anticipated, as the coronavirus pandemic has been controlled through vaccinations and will have no impact on US monetary policy.
Federal Reserve Chairman Jerome Powell has repeatedly said that higher inflation will be temporary, and that supply chains are expected to adapt to improve their efficiency.
Most economists share the Fed’s stances. Supply chain difficulties mostly reflect a shift in demand toward goods at the expense of services during the pandemic.
Inflation has also accelerated due to the low base of comparison compared to last spring.
“The central bank is going to ignore accelerating inflation for now,” said Ryan Sweet, senior economist at Moody’s Analytics.
The core PCE consumer price index based on personal spending – which excludes food and energy – rose 0.7% last month. It was the largest rise in the underlying metric since October 2001, following a 0.4% rise in March.
In the 12 months to April, the underlying PCE advanced 3.1%, the highest level since July 1992, after having marked a rise of 1.9% in March. Economists polled by Reuters estimated a year-on-year reading of 2.9%.
The PCE index is the Fed’s preferred measure of inflation. Annualized readings could remain elevated for a time by so-called “base effects” before starting to decline later this year.
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While consumer spending moderated last month as the momentum for direct tax relief waned, families amassed at least $ 2.3 trillion in savings during the pandemic, which should support domestic demand.
Wages are also increasing as companies seek to attract more workers in order to expand production.
Generous unemployment benefits, childcare difficulties and fears of contracting the virus, even with widely accessible vaccines, as well as pensions related to the pandemic, have made it difficult for companies to find employees.
This occurs despite the fact that nearly 10 million Americans are officially unemployed. Consumer spending, which accounts for more than two-thirds of economic activity in the United States, increased 0.5% last month. Data for March was revised up to show that personal spending added 4.7% instead of 4.2%, as previously reported.
The increase in consumer spending was in line with market expectations and the reading was limited by a 0.6% drop in expenditures on goods.
(Report by Lucia Mutikani. Edited in Spanish by Marion Giraldo)