Fed rate cut difficult! US April PCE inflation rate surged to 3.8%, domestic demand hot as savings rate fell to 2.6%

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The U.S. Bureau of Economic Analysis (BEA) released its latest data today (28th), showing that the April PCE Price Index year-over-year rate surged to 3.8%, higher than the previous month's 3.5%; while the core PCE Price Index year-over-year rate, excluding food and energy, held steady at 3.3%. The data reflects that U.S. domestic consumption remains robust, with monthly consumer spending increasing by over $110 billion in a single month, but the personal savings rate has fallen to a low of 2.6%. This "hot outside, dry inside" report card may force Fed officials to continue maintaining high interest rate policies. (Background: Fed officials warn: persistent energy inflation combined with AI productivity expectations may force the central bank to raise interest rates) (Context: Powell hands over to Warsh: How have U.S. stocks performed in the short term after past Fed Chair transitions?) The latest U.S. inflation warning has sounded again, casting another shadow over Wall Street's expectations for the Fed to launch interest rate cuts within the year. The U.S. Bureau of Economic Analysis (BEA) officially released the April Personal Income and Outlays report at 8:30 AM Eastern Time today (May 28, 2026). Among them, the Fed's most favored inflation gauge—the PCE Price Index—showed a significant rebound, indicating that price pressures remain stubborn. According to official data released by the BEA, the key inflation data for April 2026 performed as follows: - PCE Price Index (month-over-month): rose 0.4% (previous month was 0.7%). - PCE Price Index (year-over-year): reached as high as 3.8%, showing a notable climb compared to March's 3.5%, continuing to move further away from the Fed's 2% long-term policy target. - Core PCE Price Index (excluding food and energy, month-over-month): rose 0.2%. - Core PCE Price Index (year-over-year): came in at 3.3%, basically in line with market expectations, but still hovering at high levels. In terms of economic momentum, despite facing a high inflation environment, American consumers' willingness to spend remains strong. Current-dollar personal consumption expenditures (PCE) in April increased substantially by $111.1 billion (a monthly increase of 0.5%). Among these, services spending increased by $67.2 billion, while goods spending rose by $44 billion; after adjusting for inflation, real PCE still posted a modest monthly growth rate of 0.1%. However, the strong consumption masks the concerning issue of "emptying wallets." The data shows that personal income performance in April was nearly flat (only a 0.0% monthly increase), and disposable personal income (DPI) even slightly decreased by $19.9 billion (-0.1%). The main reason for stagnant income was the termination of the "Farmer Bridge Assistance Program" in mid-April, which caused a sharp decline in farm proprietors' income, offsetting growth in private enterprise wages. Under the dual pressure of "stagnant income and surging spending," the U.S. personal savings rate in April has slipped all the way down to 2.6%, with total national personal savings dropping to $611.7 billion, indicating that consumers are tapping into their savings to support daily expenses. Macroeconomic analysts point out that the April PCE report conveys a thorny signal: although real personal income is shrinking (-0.5%), the overall inflation stickiness and domestic demand resilience in the U.S. remain strong. This means that the Fed currently lacks sufficient confidence to confirm that inflation is steadily returning to the 2% target. Under these circumstances, the market generally expects that the Fed may continue to maintain a "Higher for longer" hawkish tone at the upcoming interest rate decision meeting.

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Published:2026-05-28 12:09:24

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