Steps taken by the Federal Reserve to curb inflation may be starting to take hold.
The Bureau of Economic Analysis released its personal consumption expenditures (PCE) price index on Friday, which showed inflation fell to 4.2% in March from 5.2% in February.
This figure is still more than double the Fed’s target of 2% annual inflation.
“The tide may be turning in the Fed’s inflation battle but more time will be needed to make that call,” said Chris Rupkey, an economist for FWDBONDS, according to the Washington Examiner.
In addition, consumer spending in March was flat, suggesting that consumers are exhausted by high prices.
“The consumer engine is sputtering,” said Gregory Daco, chief economist for EY-Parthenon, according to The Hill. “The cutbacks in spending were broad-based across most goods and services categories with solid spending on gasoline, utilities and health care preventing a larger drop in the headline figure.”
Core PCE inflation, a measure of the prices paid by people for domestic purchases of goods and services that does not include energy or food prices, declined just ten basis points to 4.6% year-over-year.
The U.S. has been battling some of the worst inflation numbers it has seen in decades, reaching a 40-year high in 2022, according to AP News.
Although the recent dip may be an encouraging sign, it will likely not deter the Fed from another interest rate hike when it meets on May 2-3.
“Participants don’t see rate cuts this year,” Fed Chair Jerome Powell said in March, according to Bankrate. “They just don’t.”
While interest rates are expected to drop in 2024, last month, the Fed suggested that cuts may be as little as 75 basis points, per Bankrate.
High interest rates have been weighing on the banking sector, which has seen several bank failures, with the latest one coming from First Republic Bank, which was announced on Friday.
It is the third bank failure since March, following Silicon Valley Bank and Signature Bank.
On March 1, First Republic’s stock traded at $122.50 but closed at just $3.51 on Friday.