US PCE Inflation Rises to Highest Level Since 2023 Despite Softer Monthly Increase

The Federal Reserve’s preferred inflation gauge showed persistent price pressures in April, even as monthly gains came in slightly below market expectations, reinforcing concerns that inflation in the U.S. economy remains elevated.

According to the U.S. Bureau of Economic Analysis, the Personal Consumption Expenditures (PCE) price index increased 0.4% month-over-month in April 2026, below economists’ expectations of a 0.5% increase. The reading followed a sharp 0.7% rise in March, which had marked the strongest monthly advance since June 2022.

On an annual basis, headline PCE inflation accelerated to 3.8%, up from 3.5% in March, reaching its highest level since May 2023. The increase places the Fed’s preferred inflation measure closer to headline consumer price inflation trends, highlighting the continued resilience of underlying price pressures across the economy.

Goods inflation moderated during the month, with prices rising 0.7% after surging 1.4% in March. Services inflation remained steady at 0.3%, signaling that price increases in key areas of the economy continue to persist despite tighter financial conditions and elevated borrowing costs.

Meanwhile, the core PCE index — which excludes volatile food and energy categories and is closely monitored by policymakers at the Federal Reserve — increased 0.2% in April following a 0.3% gain in March.

On a yearly basis, core PCE inflation edged up to 3.3% from 3.2%, marking its highest reading since late 2023 and reinforcing expectations that the path toward the Fed’s 2% inflation target may remain uneven.

The latest inflation data arrives at a critical moment for financial markets as investors reassess the outlook for interest rates, monetary policy, and economic growth. While the slower monthly pace may provide some temporary relief, the acceleration in annual inflation metrics is likely to keep policymakers cautious about signaling aggressive rate cuts in the near term.

Economists continue to monitor whether elevated services inflation, wage pressures, and geopolitical risks could sustain broader price increases through the second half of 2026.