April PCE Report Seen Showing Energy-Driven Inflation Rising to 3-Year Highs 

Key Takeaways

• April’s PCE inflation report is expected to show another month of elevated price pressures, driven partly by gas prices.
• Both the overall and core annual inflation rates are expected to rise in April.
• With inflation high, a majority of bond traders expect the Fed to hold interest rates steady at its June meeting but increase rates by the end of 2026.

Forecasts for the April Personal Consumption Expenditures Price Index report show the key inflation measure heading to its highest levels since 2023, as energy costs add to an already-sticky pressure picture for consumers.

The PCE inflation index is expected to show a 3.9% year-over-year increase, according to FactSet, well above the Federal Reserve’s 2.0% target. The PCE Index is forecast to rise 0.53% for April. That’s a slightly smaller increase than in March, when the index rose 0.66% as energy prices surged. Core PCE, which excludes food and energy prices, is expected to rise 0.3% versus March and 3.3% yearly, both within a tenth of a percentage point above their March levels.

“We had gotten to the point where that last mile of inflation … mostly had been eradicated,” says Morningstar senior US economist Preston Caldwell. “Now it’s starting to move in the opposite direction, and it’s possible that it could accelerate a bit further if we want to extend the preview into the May data.” Caldwell forecasts a core inflation print in line with consensus at 0.3% and 3.3%, and a slightly cooler overall inflation print of 0.46% for April over March and a 3.8% year-over-year increase.

April PCE Inflation Report Highlights

• PCE report release date and time: Thursday, May 28, at 8:30 a.m. EDT
• The PCE deflator is forecast to rise 0.53% in April after rising 0.66% in March.
• Core PCE is forecast to rise 0.30% in April after rising 0.29% in March.
• The PCE is forecast to rise 3.9% year over year in April after increasing 3.5% in March.
• Core PCE year over year is forecast to rise 3.3% in April after increasing 3.2% in March.

Energy Prices Drive Elevated PCE Increase

Bureau of Economic Analysis data shows prices for gasoline and other energy goods increased by 20.9% in March, up from a 1.4% increase in February. But Caldwell says we might have to wait another six months or so to see if the energy price shock propagates through the wider economy. “Oil markets are really priced for perfection at this stage in terms of the war resolving itself, but if that plays out, we should start to see fuel prices at the pump fall a little bit,” he says. “Economic growth is comfortably in positive territory,” but it may be too soon to tell if we’re seeing a “sustained upper trend in inflation.”

Goldman Sachs analysts predict PCE prices rose slightly less than consensus in April, at 0.44% month over month and 3.78% year over year. “Our forecasts reflect both higher oil prices and other effects of the war and the (mismeasured and overstated) effects of AI demand on consumer prices,” writes Goldman Sachs chief US economist David Mericle. Looking ahead, Goldman expects core PCE inflation to remain near 3% in 2026 and overall inflation to remain just below 4% this year.

PCE Data Could Push Fed to Skew Hawkish

Markets overwhelmingly expect the Fed to hold the federal-funds effective rate target steady in the near term. However, the tilt is increasing toward the Fed raising rates before the end of 2026. José Torres, senior economist at Interactive Brokers, says the question is whether the Fed, under new chair Kevin Warsh, will consider the “CPI and PCE indicators” as one-time shocks or adopt a hawkish stance “to battle ongoing inflationary pressures.”

As of midday on May 26, over 99% of bond traders foresee the rate staying within its current range of 3.50%-3.75% at its next meeting in mid-June, according to the CME FedWatch Tool. But a majority also expect a quarter-point rate hike or more by the Fed’s Dec. 9 meeting.