Feds preferred inflation gauge cools to lowest level since September calming rattled markets

The Federal Reserve’s preferred inflation gauge cooled to its lowest level since last fall, helping to calm jittery markets Friday despite rising trade tensions between the US and China.The Personal Consumption Expenditures (PCE) index rose just 2.1% in April compared with a year earlier, down from 2.3% in March and the lowest since September, according to data released Friday by the Commerce Department.Excluding the volatile food and energy categories, core PCE prices rose 2.5% from a year earlier, below the March figure of 2.7%, and the lowest in more than four years.

Economists track core prices because they typically provide a better read on where inflation is headed.The Commerce Department data came out hours after President Trump accused China of violating a tariff agreement, ramping up tensions in a trade war that has roiled global markets and businesses.Traders continued to bet that the U.S.central bank will cut its target for short-term borrowing costs in September.At 11 a.m.

ET, the Dow Jones Industrial Average fell 45 points, or 0.1%, to 42,173, the S&P 500 lost 17 points, or 0.43%, to 5,894 and the Nasdaq Composite dropped 103 points, or 0.5%, to 19,071.The figures show inflation is still declining from its post-pandemic spike, which reached the highest level in four decades in July 2022.Economists and some business executives have warned that prices will likely head higher as Trump’s widespread tariffs take effect, though the timing and impact of those duties are now in doubt after they were struck down late Wednesday in court.On a monthly basis, overall prices and core prices both increased just 0.1% from March to April.

The cost of big-ticket manufactured goods rose a hefty 0.5%, though that increase was offset by a 0.1 decline in other goods, such as groceries.The cost of services rose just 0.1% from March to April.The big increase in durable goods prices could reflect the early impact of tariffs.

Americans also cut back their spen...