According to the Bureau of Economic Analysis (BEA), the Personal Consumption Expenditures (PCE) Price Index showed a decrease in inflationary pressure in the US in April. This inflation metric is closely monitored by the Federal Reserve to respond promptly to shifts in the economy. The current easing of inflationary pressure justifies the central bank’s intention to loosen its monetary policy further.

The BEA estimated that the PCE Price Index declined to 2.1% in April from a year ago, the lowest level since February 2021. The index logged a 0.1% uptick on a monthly basis compared to a flat reading in March.

As for the core inflation indicator, which excludes the volatile food and energy prices, it stood at 2.5% year-over-year. The core index inched up by 0.1% on a monthly basis, also following a flat reading the previous month.

As a result, the US economy contracted by 0.2% on an annualized basis in the first quarter of 2025. The Bureau of Economic Analysis assumes that inflationary pressure has been ebbing away. Such a development may prompt the Federal Reserve to proceed with further interest rate cuts.

For reference, the next policy meeting of the Federal Open Market Committee (FOMC) is scheduled for June 18. The FOMC policymakers left borrowing costs unchanged at the three previous meetings. In the meantime, market participants expect the FOMC to reduce the funds rate from the current range of 4.25% to 4.5% by 25 basis points.