The Fed’s preferred measure of inflation remains at 2.7% in April

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US inflation held steady at 2.7 per cent in the year to April, according to the measure the Federal Reserve uses to set its target for price pressures.

Friday’s data on the personal consumption expenditures index was in line with economists’ expectations that inflation will remain unchanged in March.

The Fed’s target for the key personal consumption expenditures index is 2 percent.

The core personal consumption expenditures rate, which ignores changes in food and fuel prices, was 2.8 percent, also in line with expectations.

The monthly headline figure was 0.3 percent and the core figure was 0.2 percent.

Fed officials are scheduled to next vote to set interest rates on June 12. They are expected to say they need more data on inflation before cutting borrowing costs from a 23-year high of 5.25 to 5.5 percent.

Investors believe the data leaves US interest rate setters poised to cut interest rates before the US presidential election in November, providing a potential boost to incumbent Joe Biden in the White House.

Markets expect a quarter-point cut this year, with a little more than a 50 percent chance of the first cut being made in September – the final political decision before the election.

The data, published by the Bureau of Economic Analysis, showed that US shoppers are reining in their spending, with real consumption expenditures falling by 0.1 percent.

“Everything points to consumption slowing down, and it should slow down — there are rising interest rates, the labor market is coming off the boil, and prices are rising,” said Samir Samana, chief global market strategist at Wells Fargo Bank. “If anything, it might show up a little later than we expected.”

The Fed “will likely feel a little bit comfortable with that number, but it’s by no means satisfied,” said Dean Mackey, chief economist at Point72.

“It’s not easy to have a high-conviction view on Fed policy because the Fed itself doesn’t really know what it’s going to do,” Mackey continued. “It really depends on the monthly core inflation prints, which have been very volatile in recent months.”

US stocks opened higher on Friday following the release of April personal consumption expenditures data, but lost some early momentum. Wall Street’s Standard & Poor’s 500 index fell 0.3 percent, while the Nasdaq Composite, which is dominated by technology stocks, fell 0.8 percent. The two indexes remained on track for their first weekly decline since mid-April.

In government bond markets, the policy-sensitive two-year Treasury yield fell 0.05 percentage point to 4.88 percent, while the benchmark 10-year yield fell 0.06 percentage point to 4.49 percent. Lower yields reflect higher prices.

Additional reporting from Martha Muir in Washington