Inflation is heating up as the economy reopens. Consumer prices in the U.S. surged in April. What’s more, underlying inflation posted its biggest annual gain in nearly three decades.
The Commerce Department reported Friday that the personal consumption expenditures price index excluding the volatile components - food and energy - shot up 0.7% last month. But on an annual basis, the core PCE price index vaulted 3.1%. That was much bigger than March, and it was the most since July of 1992.
That core PCE index is the Fed’s preferred inflation measure, and the April number blew way past the central bank’s inflation target of 2%. But the strong inflation readings had been widely anticipated and will not impact monetary policy. Fed Chair Jerome Powell has insisted higher inflation will be temporary, and most economists share his views. The higher prices reflect pent-up demand, and inflation is accelerating as last spring’s weak readings drop from the calculation.
Friday’s report also showed that personal income plunged more than 13% in April after surging higher in March.
On Wall Street, stocks opened higher, and the dollar rose against a basket of major currencies.