NEW YORK/LONDON- The dollar was lower and on track for its first monthly decline in 2024 after data showed that US inflation rose in line with expectations in April.
The personal consumption expenditures (PCE) price index increased 0.3 percent last month, the Commerce Department’s Bureau of Economic Analysis said on Friday, matching the unrevised gain in March. The data suggests the elevated pace of price increases could last longer than expected and offers little clarity on how soon the US Federal Reserve will be able to cut interest rates.
“These numbers do not give any sense that the Fed is achieving its goal,” said Joseph Trevisani, senior analyst at FX Street. “It’s already stated what its goal is, so the markets are willing to give it some time … but that time I do not think is unlimited.”
The US dollar index was last down 0.39 percent at 104.36.
The Fed has raised borrowing costs by 525 basis points since March 2022 in a bid to cool demand across the economy. Financial markets initially expected the first rate cut to come in March, which then got pushed back to June and now to September.
Official data showed on Thursday the US economy grew at an annualized rate of 1.3 percent from January through March, down from the previous estimate of 1.6 percent after downward revisions to consumer spending.
Although inflation is “moving in the right direction,” said Kyle Chapman, FX markets analyst at Ballinger Group, “policymakers are definitely not out of the woods yet.”
“I would caution against overinterpreting a single month’s data,” he said.
The euro edged up after data showed price pressures in the euro zone picked up faster than expected in May, complicating the outlook for the European Central Bank.
